Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
19 Apr 2007
Case Brief
The Reserve Bank of India cancelled the licence of The Rahuta Union Co-operative Bank Ltd., 24 Parganas (North), West Bengal under Section 22 of the Banking Regulation Act, 1949 (AACS). RBI said the bank had ceased to be solvent, revival efforts with the Government of West Bengal had failed, and depositors were being inconvenienced by prolonged uncertainty. The release describes worsening financial condition in statutory inspections, negative realizable value of paid-up capital and reserves, and further deterioration over time. The bank had earlier been placed under Section 35A directions restricting acceptance of term deposits and fresh advances, and later under further directions capping withdrawals at Rs.1000 per depositor. RBI issued a show-cause notice, found no viable revival plan, and cancelled the licence as a final step. It also requested the Registrar of Co-operative Societies, West Bengal to order winding up and appoint a liquidator, and noted that depositors would be entitled to DICGC coverage up to Rs.1,00,000 subject to usual terms.
Why RBI Acted
The Reserve Bank of India cancelled the licence granted under Section 22 of the Banking Regulation Act, 1949 (AACS) to The Rahuta Union Co-operative Bank Ltd., 24 Parganas (North), West Bengal. The stated reasons were that the bank had ceased to be solvent, all attempts to revive it in consultation with the Government of West Bengal had failed, and continued uncertainty was inconveniencing depositors. RBI noted that statutory inspection revealed weakening financial position, negative realizable value of paid-up capital and reserves, further deterioration on subsequent scrutiny, and serious deficiencies in working. Earlier, the bank had been placed under Section 35A directions restricting acceptance of term deposits and granting fresh advances, and later directions capped withdrawals at Rs.1000 per depositor. After finding no viable revival plan and remote chances of recovery, RBI took the final step of cancelling the licence in the interest of depositors and requested winding up and appointment of a liquidator.
Operating Impact
The bank can no longer carry on banking business, including acceptance and repayment of deposits. Liquidation proceedings will begin, and depositors will be paid insured amounts up to the DICGC limit, while the co-operative registrar is expected to initiate winding up and appoint a liquidator.
Regulatory Basis
- Section 35A of the Act
- Section 22 of the Act
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 16 Apr 2007
- Effective From
- 4 May 2002
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank