Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
24 Sept 2008
Case Brief
The Reserve Bank of India cancelled the licence of The Rohe Ashtami Sahakari Urban Bank Ltd., Roha, Dist. Raigad, Maharashtra on 9 September 2008. RBI said the bank had ceased to be solvent, revival efforts in consultation with the Government of Maharashtra had failed, and there was no concrete merger proposal. The bank had earlier been placed under Section 35A directions restricting operations, including a cap of Rs. 500 on deposit withdrawals, and its reply to the show-cause notice was not acceptable. RBI requested the Registrar of Co-operative Societies to issue winding-up orders and appoint a liquidator; upon liquidation, depositors would be entitled to DICGC coverage up to Rs. 1,00,000 subject to scheme conditions.
Why RBI Acted
RBI cancelled the licence of the co-operative urban bank on 9 September 2008 because it had ceased to be solvent, efforts to revive it in consultation with the Government of Maharashtra had failed, and the prospect of revival was considered remote. The bank’s financial position had deteriorated in statutory inspections, earlier operational instructions and Section 35A directions had already been issued to conserve liquidity and prevent preferential payments, and the bank’s reply to the show-cause notice issued on 2 May 2008 was found unsatisfactory. RBI also requested the Registrar of Co-operative Societies to initiate winding up and appoint a liquidator.
Operating Impact
The bank can no longer carry on banking business and will enter liquidation proceedings. Depositors’ repayments will proceed subject to the Deposit Insurance Scheme, with coverage up to Rs. 1,00,000 per depositor under usual terms and conditions. The cancellation also affects the bank’s management and counterparties because normal banking operations cease.
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 (As applicable to Co-operative Societies)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 9 Sept 2008
- Effective From
- 9 Sept 2008
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank