Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
17 Jan 2002
Case Brief
The Reserve Bank of India cancelled the banking licence of Vinayak Local Area Bank Ltd., Sikar (Rajasthan) under Section 22(4) of the Banking Regulation Act, 1949. RBI said the bank’s affairs were being conducted in a manner detrimental to depositors’ interests and that the general character of its management was prejudicial to the public interest of present and future depositors. As a result, the bank is precluded from transacting banking business and cannot accept public deposits or allow withdrawals by cheque, draft, order or otherwise.
Why RBI Acted
Under Section 22(4) of the Banking Regulation Act, 1949, RBI cancelled the licence of Vinayak Local Area Bank Ltd., Sikar (Rajasthan) to carry on banking business in the districts of Jhunjhunu, Sikar and Churu in Rajasthan. RBI stated that it was satisfied the bank’s affairs were being conducted in a manner detrimental to the interest of depositors and that the general character of the management of the banking company was prejudicial to the public interest of its present and future depositors.
Operating Impact
The bank cannot carry on banking business in the affected districts and must stop accepting deposits and honouring withdrawal instructions through normal banking channels. Depositors were told they could approach the bank for repayment through arrangements made with State Bank of India, Station Road, Sikar.
Regulatory Basis
- sub-section (4) of Section 22 of the Banking Regulation Act, 1949
- Section 22 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- License cancellation
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Bank