The Vasavi Co-operative Urban Bank Ltd., Hyderabad

On July 14, 2014, RBI cancelled the licence of The Vasavi Co-operative Urban Bank Ltd., Hyderabad (Telangana) with effect from the close of business on that date. The cancellation was issued after RBI found that the bank had ceased to be solvent, all efforts to revive it had failed, and continued uncertainty was inconveniencing depositors. The background notes that inspection under section 35 of the Banking Regulation Act, 1949 (as applicable to co-operative societies) showed deterioration in financial position, inadequate assets to meet outside liabilities under section 22(3)(a), non-compliance with minimum capital and reserves under section 11(1), and poor governance. RBI had earlier issued a show cause notice in February 2014, but the replies were not satisfactory; RBI then decided to cancel the licence in the interest of depositors. Consequent to cancellation, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and liquidation proceedings were to be initiated.

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 through the liquidation process, with DICGC cover available up to the statutory ceiling of Rs 1,00,000 per depositor subject to applicable terms and conditions. The effective date is the close of business on July 14, 2014.