Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
25 Mar 2010
Case Brief
The Reserve Bank of India cancelled the licence of The Samata Sahakari Bank Ltd., Nagpur, Maharashtra after finding that the bank had ceased to be solvent and that efforts to revive it had failed. RBI said the bank’s realizable paid-up capital and reserves were negative, revival prospects were remote, and the bank’s reply to the show-cause notice was unacceptable. The release also records that the bank had previously been placed under Section 35A directions restricting its activities. Following cancellation, the Registrar of Co-operative Societies, Maharashtra was requested to initiate winding-up and appoint a liquidator. The bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and depositors may receive insurance coverage up to the statutory DICGC limit.
Why RBI Acted
RBI cancelled the banking licence of The Samata Sahakari Bank Ltd., Nagpur, Maharashtra after concluding that the bank had ceased to be solvent, revival efforts had failed, the realizable value of paid-up capital and reserves was negative, and the chances of revival were remote without a viable action plan. A show-cause notice issued under Section 22 of the Banking Regulation Act, 1949 (as applicable to cooperative societies) was examined and found unacceptable. The release also notes that the bank had earlier been placed under directions under Section 35A of the Banking Regulation Act, 1949 (as applicable to cooperative societies), and that liquidation proceedings would follow with deposit insurance payouts up to the statutory ceiling under DICGC.
Operating Impact
The bank cannot conduct banking business or accept/repay deposits, and liquidation proceedings will proceed. Depositors will be paid insured amounts up to the DICGC ceiling of Rs. 1 lakh, subject to the liquidation process.
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
- 19 Mar 2010
- Effective From
- 19 Mar 2010
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank