Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
31 May 2006
Case Brief
The Reserve Bank of India cancelled the licence of The Ichalkaranji Jiveshwar Sahakari Bank Ltd., Ichalkaranji, Dist. Kolhapur, Maharashtra, after determining that the bank had ceased to be solvent and that revival efforts had failed. RBI had earlier issued Section 35A directions with a cap on individual depositor withdrawals and later superseded the board for mismanagement. A subsequent inspection showed further deterioration, with erosion of deposits and negative realizable value of paid-up capital and reserves. RBI concluded there was no viable revival plan and cancelled the licence to protect depositor interests, while also requesting the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator. The bank is consequently prohibited from carrying on banking business, including accepting and repaying deposits, and depositors will be paid insured amounts under the DICGC framework subject to applicable terms and conditions.
Why RBI Acted
RBI cancelled the licence of Ichalkaranji Jiveshwar Sahakari Bank Ltd., Ichalkaranji, Dist. Kolhapur, Maharashtra, after concluding that the bank had ceased to be solvent, its financial condition had further deteriorated, and the chances of revival were remote. The bank had earlier been placed under Section 35A directions (with a withdrawal cap) and its board was superseded for mismanagement. RBI stated that all efforts to revive the bank in consultation with the Government of Maharashtra had failed, and the cancellation was taken as a final step in the interests of depositors. The release also notes that the bank is to be wound up and a liquidator appointed, and that after cancellation it is prohibited from carrying on banking business, including acceptance and repayment of deposits.
Operating Impact
The bank must cease banking operations and enters liquidation proceedings; it cannot accept or repay deposits or otherwise conduct banking business. Depositors will receive claims processing for insured deposits up to the DICGC ceiling, while the Registrar of Co-operative Societies is expected to issue winding-up and liquidation orders.
Regulatory Basis
- Section 35A of the Banking Regulation Act, 1949 (As applicable to Co-operative Societies)
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 30 May 2006
- Effective From
- 30 May 2006
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank