Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
22 Oct 2009
Case Brief
The Reserve Bank of India cancelled the banking licence of The Surat Mahila Nagrik Sahakari Bank Ltd., Surat, Gujarat, after concluding that the bank had ceased to be solvent and that its affairs were being conducted in a manner detrimental to the interests of depositors. RBI said the bank’s financial position was impaired in the March 31, 2008 statutory inspection and deteriorated further in the March 31, 2009 inspection. After a show-cause notice dated July 21, 2009 was issued and the bank’s reply was found unsatisfactory, RBI took the extreme step of cancelling the licence after close of business on October 20, 2009. RBI also requested the Registrar of Co-operative Societies, Gujarat to commence winding-up proceedings and appoint a liquidator.
Why RBI Acted
The Reserve Bank of India cancelled the licence of The Surat Mahila Nagrik Sahakari Bank Ltd., Surat after concluding that the bank had ceased to be solvent, that its affairs were being conducted in a manner detrimental to the interests of depositors, and that continued uncertainty was inconveniencing depositors. RBI noted that the statutory inspection as on March 31, 2008 showed impaired financial position, which deteriorated further in the March 31, 2009 inspection. A show-cause notice dated July 21, 2009 was issued asking why the licence should not be cancelled, but the bank’s reply was not found satisfactory. RBI also requested the Registrar of Co-operative Societies, Gujarat to issue winding-up orders and appoint a liquidator.
Operating Impact
The bank can no longer carry on banking business, including accepting or repaying deposits, and liquidation proceedings are to follow. Depositors’ claims will be handled under the Deposit Insurance Scheme, subject to its terms and conditions, with repayment up to the applicable insurance ceiling.
Regulatory Basis
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 20 Oct 2009
- Effective From
- 20 Oct 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank