Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
20 Apr 2009
Case Brief
RBI cancelled the banking licence of Yashwant Urban Co-operative Bank Ltd., Parbhani, Maharashtra after concluding that the bank had ceased to be solvent and that efforts to revive it in consultation with the Government of Maharashtra had failed. The release says the statutory inspection revealed non-compliance with several provisions of the Banking Regulation Act, 1949 (as applicable to co-operative societies) and that the bank's financial position had become precarious, with negative realizable value of paid-up capital and reserves. RBI had previously placed the bank under Section 35A directions restricting it from incurring any liability, and a show-cause notice under Section 22 was issued; the bank's reply was found unacceptable. Following the cancellation, the Registrar of Co-operative Societies, Maharashtra was requested to initiate winding up and appoint a liquidator.
Why RBI Acted
After statutory inspection, RBI found that Yashwant Urban Co-operative Bank Ltd., Parbhani had a precarious financial position and was not complying with several provisions of the Banking Regulation Act, 1949 (as applicable to co-operative societies). The bank had ceased to be solvent, the realizable value of its paid-up capital and reserves was negative, and the chances of revival were remote in the absence of a viable action plan. RBI had earlier placed the bank under Section 35A directions precluding it from incurring any liability, but after the bank's reply to the show-cause notice was found unacceptable and revival efforts failed, RBI cancelled its licence under Section 22. The Registrar of Co-operative Societies, Maharashtra was requested to initiate winding up and appoint a liquidator.
Operating Impact
The bank can no longer carry on banking business, including accepting or repaying deposits, and liquidation proceedings will begin. Depositors will be eligible for insurance claim processing up to the statutory DICGC limit of Rs. 1,00,000 per depositor, subject to liquidation and insurance procedures.
Regulatory Basis
- Section 35A of the Banking Regulation Act 1949 (As Applicable to Cooperative Societies)
- Section 22 of the Banking Regulation Act, 1949(As Applicable to Cooperative Societies)
- Section 5(b) of the Banking Regulation Act, 1949(As Applicable to Cooperative Societies)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 18 Apr 2009
- Effective From
- 18 Apr 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank