Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
9 Mar 2006
Case Brief
The Reserve Bank of India cancelled the licence of The Dabhoi Nagrik Sahakari Bank Ltd., Dabhoi, Gujarat after concluding that the bank had ceased to be solvent and that all revival efforts had failed. The release says the bank's financial condition had deteriorated, its deposits were getting eroded, and the realisable value of paid-up capital and reserves was negative. Earlier, the RBI had issued Section 35A directions prohibiting acceptance of fresh deposits and restricting repayment of deposits to Rs 500 per depositor. After the cancellation, the Registrar of Co-operative Societies, Gujarat was requested to initiate winding up and appoint a liquidator. The bank is prohibited from carrying on banking business, including accepting and repaying deposits, and insured depositor claims would move through the DICGC process.
Why RBI Acted
The RBI cancelled the licence of The Dabhoi Nagrik Sahakari Bank Ltd., Dabhoi, Gujarat after finding that it had ceased to be solvent, that efforts to revive it in consultation with the Government of Gujarat had failed, and that the bank did not have a viable revival plan. The release notes that in May 2004 Section 35A directions had been issued prohibiting acceptance of fresh deposits and restricting repayment of deposits to Rs 500 per depositor, and that inspection showed deterioration in the bank's financial condition with negative realizable value of paid-up capital and reserves. The RBI also requested the Registrar of Co-operative Societies, Gujarat to initiate winding-up and appoint a liquidator. Consequent to the cancellation, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and depositors will be paid insured amounts under the DICGC mechanism in liquidation.
Operating Impact
The bank can no longer conduct banking business, accept fresh deposits, or repay deposits except through the liquidation/DICGC process. Depositors are affected because repayment will be limited to insured amounts under the DICGC framework, while the Registrar is expected to wind up the bank and appoint a liquidator.
Regulatory Basis
- Section 35A of the Banking Regulation Act, 1949
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 7 Mar 2006
- Effective From
- 14 Jun 2004
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank