Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
26 Feb 2008
Case Brief
The Reserve Bank of India cancelled the licence of The Bharuch Nagarik Sahakari Bank Ltd., Bharuch, Gujarat on February 22, 2008. RBI said the bank had ceased to be solvent, revival efforts in consultation with the Government of Gujarat had failed, and continued uncertainty was inconveniencing depositors. The release further states that inspection showed deterioration in the bank’s financial condition, erosion of deposits, negative realizable value of paid-up capital and reserves, and further deterioration in asset quality. Earlier Section 35A directions had already restricted the bank from accepting fresh deposits, granting fresh loans, and repaying deposits beyond Rs. 1,000 per deposit account. Following cancellation, RBI requested the Registrar of Co-operative Societies, Gujarat to order winding up and appoint a liquidator, and deposit repayment will proceed subject to the Deposit Insurance Scheme.
Why RBI Acted
The Reserve Bank of India cancelled the licence of The Bharuch Nagarik Sahakari Bank Ltd., Bharuch, Gujarat after concluding that the bank had ceased to be solvent, that efforts to revive it in consultation with the Government of Gujarat had failed, and that the chances of revival were remote. The release says inspection revealed deterioration in financial condition, erosion of deposits, negative realizable value of paid-up capital and reserves, and further deterioration in asset quality. Earlier, the bank had been placed under Section 35A directions effective close of business on July 12, 2006, prohibiting acceptance of fresh deposits and granting of fresh loans and restricting repayment of deposits to Rs. 1,000 per deposit account. RBI also requested the Registrar of Co-operative Societies, Gujarat to initiate winding up and appoint a liquidator.
Operating Impact
The bank can no longer carry on banking business, including accepting or repaying deposits, and liquidation proceedings are to begin. Depositors may receive repayment subject to deposit insurance terms and conditions, up to the applicable ceiling, while the co-operative registrar is expected to move winding-up actions.
Regulatory Basis
- Section 35A of the Act
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 22 Feb 2008
- Effective From
- 12 Jul 2006
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank