Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
2 Jan 2008
Case Brief
The Reserve Bank of India cancelled the licence of The Ravi Co-operative Bank Ltd., Kolhapur, Maharashtra after finding that the bank had ceased to be solvent and that efforts to revive it had failed. RBI noted that the bank’s financial position had first been impaired and later become precarious, that no viable plan existed to make net worth positive or satisfy regulatory prescriptions, and that continued uncertainty was inconveniencing depositors. The bank had earlier been placed under Section 35A directions restricting its operations, including a cap of Rs. 1,000 on deposit withdrawals. Following the cancellation, RBI requested the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator. The bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and deposit repayment will proceed through liquidation subject to the Deposit Insurance Scheme.
Why RBI Acted
RBI stated that The Ravi Co-operative Bank Ltd., Kolhapur, Maharashtra had ceased to be solvent, revival efforts in consultation with the Government of Maharashtra had failed, and the depositors were being inconvenienced by continued uncertainty. Statutory inspection showed impaired and later precarious financial position, and the bank did not have a viable plan to restore its net worth to positive or meet regulatory prescriptions. After issuing a show-cause notice and examining the reply, RBI cancelled the bank’s licence and requested winding up and appointment of a liquidator. The bank was also noted to have been earlier placed under Section 35A directions restricting operations, including a ceiling on withdrawals of deposits at Rs. 1,000.
Operating Impact
The bank can no longer conduct banking business or accept/repay deposits. Liquidation proceedings are to begin, and depositors will receive repayment only subject to DICGC/DIGC insurance limits and liquidation terms, with up to Rs. 1,00,000 per depositor mentioned in the release.
Regulatory Basis
- Section 35 A 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
- 27 Dec 2007
- Effective From
- 27 Dec 2007
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank