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Vizianagaram Co-operative Urban Bank Ltd., Vizianagaram, (Andhra Pradesh)

Co-operative bankVizianagaram, Andhra Pradesh

The RBI action, regulatory basis, and operating impact linked to this entity.

Recorded RBI impact

License cancellation

License cancellation · Fresh imposition

S5

Published by RBI

20 Jul 2010

Case Brief

The Reserve Bank of India cancelled the licence of Vizianagaram Co-operative Urban Bank Ltd., Vizianagaram, Andhra Pradesh, after concluding that the bank’s operations were detrimental to depositors and the public, its financial position had declined without foreseeable revival, and compliance efforts had failed. Inspections showed deterioration in key financial parameters, inadequate assets to meet liabilities, and non-compliance with minimum capital and reserve requirements. RBI had earlier issued operational instructions restricting premature withdrawal of deposits and acceptance of fresh deposits, and later issued a show-cause notice that did not elicit a satisfactory reply or viable turnaround plan. The cancellation was ordered in the interest of depositors, and liquidation proceedings were to be initiated.

Why RBI Acted

Capital & exposure normsReporting & disclosureCustomer protectionGovernance oversightLicensing breach

RBI cancelled the banking licence after finding, through statutory inspections, that the bank’s financial position had continued to deteriorate from 2003 onward, with weakening net worth, CRAR and rising NPAs leading to deposit erosion. The bank was not meeting the minimum capital and reserves requirement under Section 11(1) and did not have adequate assets to meet liabilities under Section 22(3)(a); its reply to the show-cause notice was unsatisfactory and it could not provide any concrete plan to restore viability. RBI concluded that allowing it to continue banking would harm public interest and depositors.

Operating Impact

The bank can no longer conduct banking business, including accepting or repaying deposits, and liquidation proceedings are to follow. Depositors’ repayments will proceed subject to the Deposit Insurance Scheme, up to the applicable insured limit and terms.

Regulatory Basis

  • Section 35 of the Banking Regulation Act 1949 (AACS)
  • Section 22 (3) (a) of the Act
  • Section 11 (1) of the Act
  • Section 5(b) of the Banking Regulation Act, 1949 (AACS)

Action Facts

Primary Impact
License cancellation
Order Date
10 Jun 2010
Effective From
10 Jun 2010
Entities Affected
1
Entity Role
Primary
Entity Type
Co-operative bank