RBI cancels licence of two urban co-operative banks

On liquidation, every depositor will be entitled to repayment of deposits up to Rs 1 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under the usual terms and conditions.

The statutory inspection of the Siddhpur bank with reference to its position as on March 31, 2006 had indicated that its financial position was impaired. Subsequent inspections on March 31, 2007 and March 31, 2008 revealed that the bank’s financial position had deteriorated further. It was then issued directions under Section 35 A of the Banking Regulation Act, 1949 on August 21 restricting its operations for six months.

The RBI also issued a notice to it on August 21, 2008, asking it as to why its licence should not be cancelled. In the absence of any viable proposal to turn around and achieve the required regulatory prescriptions, the possibility of revival of the bank was remote. With the cancellation of its licence and commencement of liquidation proceedings, the process of paying the depositors of Siddhpur Commercial Co-operative Bank will begin.

The Bhavnagar bank also ceased to be solvent and efforts to revive it in close consultation with the state government had failed.

The statutory inspection of the bank with respect to its position as on December 31, 2002 had indicated that its financial position was impaired. It was placed under directions with effect from August 21, 2004. In view of the unsatisfactory state of affairs of the bank, the Board of Directors of the bank was superseded with effect from December 14, 2004. The inspection findings of the bank with reference to its financial position as on December 31, 2004 and March 31, 2006 further indicated that the bank’s financial health was not sound.

The statutory inspection of the bank with respect to its position as on March 31, 2007 revealed that its financial position was precarious. The RBI issued a show cause notice to the bank on September 4, 2008 asking it why its licence should not be cancelled. The bank did not have a viable plan for revival.