Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
13 Sept 2013
Case Brief
The Reserve Bank of India cancelled the banking licence of The Srikakulam Co-operative Urban Bank Ltd., Srikakulam, Andhra Pradesh, which had been granted under Section 22 of the Banking Regulation Act, 1949 (AACS). RBI said the bank had ceased to be solvent, revival attempts had failed, and the bank was not in a position to repay depositors fully as claims fell due. The release details long-term deterioration in financial health, including negative net worth, negative CRAR, rising deposit erosion, and high NPAs. It also records defaults in CRR and SLR maintenance, KYC violations, breaches of operational instructions, and the board’s failure to act promptly against fraud committed by the managing director. RBI stated the bank was non-compliant with several provisions of the Act and that allowing it to continue would be detrimental to depositors and contrary to public interest. The licence cancellation was accompanied by initiation of liquidation proceedings, and the bank was prohibited from carrying on banking business, including acceptance and repayment of deposits.
Why RBI Acted
RBI cancelled the licence granted under Section 22 of the Banking Regulation Act, 1949 (AACS) after finding that the bank had become insolvent, revival was not feasible, and continued operations would harm public interest and depositors. The release cites severe deterioration in financial parameters over multiple inspections, including negative net worth and CRAR, high NPAs, deposit erosion, default in CRR and SLR maintenance, KYC violations, operational instruction breaches, and failure of the board to take timely action against fraud committed by the managing director. RBI also notes non-compliance with sections 11(1), 18, 22(3)(a), 22(3)(b), 24, 29 and 31 of the Act.
Operating Impact
The bank can no longer carry on banking business, including accepting or repaying deposits, and liquidation proceedings are to follow. Depositors will be paid subject to the Deposit Insurance Scheme, up to the applicable DICGC ceiling and terms, while the registrar is to appoint a liquidator for winding up.
Regulatory Basis
- Section 22 of the B.R Act, 1949 (AACS)
- Section 35 of the B.R. Act, 1949 (AACS)
- Section 35 A of the BR Act, 1949 (AACS)
- Sections 11(1), 18, 22(3)(a), 22(3)(b), 24, 29 and 31 of the Act
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 23 Aug 2013
- Effective From
- 27 Aug 2013
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank