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The Cambay Hindu Merchants Co-operative Bank Ltd., Khambhat (Gujarat)

Co-operative bankKhambhat, Gujarat

The RBI action, regulatory basis, and operating impact linked to this entity.

Recorded RBI impact

License cancellation

License cancellation · Fresh imposition

S5

Published by RBI

4 Jan 2010

Case Brief

The Reserve Bank of India cancelled the licence of The Cambay Hindu Merchants Co-operative Bank Ltd., Khambhat (Gujarat) after determining that the bank had become insolvent, was facing acute liquidity stress, and had a precarious financial position. RBI had earlier placed the bank under directions effective September 7, 2009, but subsequent revival efforts in consultation with the Government of Gujarat failed. After reviewing the bank’s reply to a show-cause notice and finding no viable turnaround plan, RBI took the extreme measure of cancelling the licence in the interest of depositors and requested the Registrar of Co-operative Societies, Gujarat to initiate winding-up and appoint a liquidator.

Why RBI Acted

Capital & exposure normsGovernance oversight

RBI cancelled the banking licence of The Cambay Hindu Merchants Co-operative Bank Ltd., Khambhat (Gujarat) after concluding that the bank had ceased to be solvent, was facing acute liquidity problems, and had a precarious financial position. The bank had already been placed under directions effective September 7, 2009 due to its financial distress, but efforts to revive it with the Government of Gujarat had failed. After examining the bank’s reply to the show-cause notice, RBI found no viable plan of action for turnaround or means to meet regulatory prescriptions, and therefore took the extreme step of cancelling the licence and initiating liquidation.

Operating Impact

The bank can no longer carry on banking business, including accepting or repaying deposits. Liquidation proceedings will begin, and depositors’ claims will be processed under the Deposit Insurance Scheme, subject to the usual DICGC ceiling of up to Rs. 1,00,000 per depositor.

Regulatory Basis

  • Section 5(b) of the Banking Regulation Act, 1949 (AACS)

Action Facts

Primary Impact
License cancellation
Order Date
30 Dec 2009
Effective From
7 Sept 2009
Entities Affected
1
Entity Role
Primary
Entity Type
Co-operative bank