Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
15 Oct 2013
Case Brief
RBI cancelled the banking licence of The Konkan Prant Sahakari Bank Ltd., Mumbai, Maharashtra, effective from the close of business on October 1, 2013. The cancellation came after the bank was found to have ceased to be solvent, with revival efforts failing, and after RBI concluded that the bank could not pay its present and future depositors. RBI cited inspection findings showing negative networth and CRAR, erosion of deposits, high NPAs, deficient credit appraisal and post-sanction supervision, non-adherence to IRAC norms, breaches of SLR and single borrower limits, and poor governance and housekeeping. The bank had earlier been placed under all-inclusive directions under section 35A, including prohibitions on fresh deposits and further lending and caps on deposit repayment; those directions had been extended from time to time. RBI also requested the Registrar of Co-operative Societies, Maharashtra, to initiate winding-up and appoint a liquidator. Once liquidation begins, insured depositor repayment under the DICGC framework will be set in motion, subject to applicable terms and conditions.
Why RBI Acted
The Reserve Bank of India cancelled the licence of The Konkan Prant Sahakari Bank Ltd., Mumbai, after finding that the bank had ceased to be solvent and that repeated efforts to revive it in consultation with the Government of Maharashtra had failed. RBI relied on statutory inspection findings showing severe financial deterioration, negative networth and CRAR, erosion of deposits, high NPAs, breaches of SLR and single borrower norms, deficient credit appraisal and supervision, poor housekeeping, and non-compliance with section 11(1) and section 22(3)(a)/(b) of the BR Act, 1949 (AACS). RBI concluded that the bank could not pay present and future depositors and that its continued operation would be detrimental to depositor interests and public interest. The licence cancellation was effective from the close of business on October 1, 2013, and liquidation proceedings were to follow.
Operating Impact
The bank can no longer carry on banking business, and liquidation proceedings are to commence. Depositors become entitled to insurance-backed repayment up to the DICGC ceiling, while any amounts beyond the insured limit depend on liquidation outcomes. The earlier operating restrictions are superseded by the licence cancellation, and the bank must cease banking operations.
Regulatory Basis
- Section 35A of the BR Act, 1949 (AACS)
- section 22 of the BR Act, 1949 (AACS)
- section 5(b) of the BR Act, 1949 (AACS)
- section 11(1)
- 22(3)(a)
- 22(3)(b)
Action Facts
- Primary Impact
- License cancellation
- Effective From
- 1 Oct 2013
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank