Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
14 Dec 2005
Case Brief
The Reserve Bank of India cancelled the licence of The Janata Co-operative Bank Ltd., Nadiad, Gujarat on December 9, 2005 after determining that the bank had ceased to be solvent and that attempts to revive it had failed. RBI had earlier placed the bank under Section 35A directions, noted deterioration in its financial condition, and issued a show-cause notice when revival prospects appeared remote. The cancellation was ordered as a final step to protect depositors, and RBI also requested the Registrar of Co-operative Societies, Gujarat to begin winding-up proceedings and appoint a liquidator.
Why RBI Acted
The Reserve Bank cancelled the licence of The Janata Co-operative Bank Ltd., Nadiad, Gujarat after concluding that the bank had ceased to be solvent, all revival efforts in consultation with the Government of Gujarat had failed, and the bank had no viable plan for revival. RBI noted that the bank's financial position was precarious, deposits were being eroded, and the realisable value of paid-up capital and reserves was negative. A show-cause notice had been issued earlier, and the cancellation was taken as the final step in the interest of depositors. RBI also requested the Registrar of Co-operative Societies, Gujarat to initiate winding up and appoint a liquidator.
Operating Impact
The bank cannot carry on banking business, including accepting or repaying deposits. Liquidation proceedings are to follow, and depositors may receive repayment only up to the insured limit under the DICGC mechanism, subject to the liquidation process.
Regulatory Basis
- Section 35A of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies)(AACS)
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 9 Dec 2005
- Effective From
- 24 Sept 2002
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank