The Challakere Urban Co-operative Bank Ltd., Challakere (Karnataka)

The RBI cancelled the banking licence of The Challakere Urban Co-operative Bank Ltd., Challakere (Karnataka) after concluding that the bank had ceased to be solvent, revival efforts with the Government of Karnataka had failed, and the bank's financial position had seriously deteriorated. The release states that a statutory inspection under Section 35A revealed several irregularities; the Registrar of Co-operative Societies, Karnataka superseded the Board of Directors in October 2003 due to those irregularities; later scrutiny by RBI found liquidity problems, further deterioration in realizable capital and reserves, negative realizable value of paid-up capital and reserves, and erosion of deposits to the extent of 100% of total deposits. After a show-cause notice under Section 22 of the Banking Regulation Act, 1949 (AACS) was issued and the reply found unacceptable, RBI took the extreme step of cancelling the licence, and also requested winding up and appointment of a liquidator. The bank was consequently prohibited from carrying on banking business, including acceptance and repayment of deposits.

The bank loses the ability to conduct any banking business, including accepting and repaying deposits, and liquidation proceedings begin. Depositors must seek repayment through the liquidation process and DICGC insurance up to Rs. 1,00,000 per depositor, while the Registrar of Co-operative Societies is expected to initiate winding up and appoint a liquidator. The effective date is after close of business on August 02, 2006.