Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
29 Mar 2010
Case Brief
The Reserve Bank of India cancelled the licence of The Bahadarpur Urban Co-operative Bank Ltd., Bahadarpur (Gujarat), after concluding that the bank had ceased to be solvent and that revival efforts had failed. RBI said the bank's financial position had deteriorated into a precarious condition, it had been placed under directions due to liquidity stress, and it could not pay depositors or present a viable turnaround plan. The Registrar of Co-operative Societies, Gujarat was requested to wind up the bank and appoint a liquidator. Following cancellation, the bank is prohibited from carrying on banking business, including accepting and repaying deposits, and depositors may claim repayment up to the DICGC insurance ceiling subject to applicable terms and conditions.
Why RBI Acted
RBI cancelled the licence of The Bahadarpur Urban Co-operative Bank Ltd., Bahadarpur (Gujarat) after finding that the bank had ceased to be solvent, its financial position had deteriorated and become precarious, and efforts to revive it had failed. The bank had been placed under directions due to its precarious financial position and liquidity crunch, received a show-cause notice, and admitted it was not in a position to pay depositors now or in future. RBI noted that no other bank came forward to merge it and there was no viable turnaround plan, so licence cancellation was taken under the Banking Regulation Act in the interest of depositors, with liquidation to follow.
Operating Impact
The bank cannot conduct banking business anymore and will enter liquidation. Depositors will be able to seek repayment through the deposit insurance framework up to the prescribed ceiling of Rs. 1,00,000, subject to usual terms and conditions.
Regulatory Basis
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 23 Mar 2010
- Effective From
- 28 Aug 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank