Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
16 Sept 2009
Case Brief
The Reserve Bank of India cancelled the licence of The Nagpur Mahila Nagari Sahakari Bank Ltd, Nagpur (Maharashtra), after concluding that the bank had ceased to be solvent, revival efforts had failed, and its depositors were being inconvenienced by continued uncertainty. RBI noted that statutory inspection findings showed the bank’s financial position was unsatisfactory, that it was not complying with several provisions of the Banking Regulation Act, 1949 (as applicable to co-operative societies), and that it had violated several RBI guidelines and instructions. RBI had earlier placed the bank under Section 35A directions on September 20, 2004, precluding it from incurring any liability, and later issued a show-cause notice on March 5, 2009; the reply was found unacceptable. The licence granted under Section 22 to conduct banking business was cancelled after the close of business on September 8, 2009, and the Registrar of Co-operative Societies, Maharashtra was requested to initiate winding up and appoint a liquidator.
Why RBI Acted
Following statutory inspection and continued review of the bank’s financial position, RBI found the bank unsatisfactory, insolvent, and unlikely to be revived. The bank had also failed to comply with several provisions of the Banking Regulation Act, 1949 (as applicable to co-operative societies) and had violated several RBI guidelines/instructions. After the show-cause reply was found unacceptable and no viable action plan was available, RBI cancelled the licence granted under Section 22 of the Banking Regulation Act, 1949 in the interest of depositors. RBI also requested the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator.
Operating Impact
The bank can no longer carry on banking business, including acceptance and repayment of deposits. Liquidation proceedings are to begin, and depositors will be eligible to claim insured deposits up to the DICGC ceiling of Rs.1,00,000, subject to applicable terms and conditions. The cancellation takes effect after close of business on September 8, 2009.
Regulatory Basis
- Section 35A of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
- Section 22 of the Banking Regulation Act, 1949(As Applicable to Cooperative Societies)
- Section 5(b) of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 20 Sept 2009
- Effective From
- 8 Sept 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank