Reserve Bank Cancels Licences of two Co-operative Banks

Reserve Bank of India has cancelled the licenses of Shree Janata Sahakara Bank Ltd., Radhanpur (Gujarat) and The Maratha Co-operative Bank Ltd., Hubli, (Karnataka). In the absence of a viable action plan, the Reserve Bank of India has taken the extreme measure of cancelling the licences of above banks after examining all options for their revival.

1. In case of Shree Janata Sahakara Bank Ltd., Radhanpur (Gujarat) RBI has cancelled the licence to the bank after the close of business on January 31, 2008. The Registrar of Co-operative Societies, Gujarat has also been requested to issue an order for winding up of the bank and appoint a Liquidator for the bank. The bank was granted a licence by Reserve Bank of India on December 13, 1986 to commence banking business. Due to liquidity problems and high NPAs, the bank was placed under directions under Section 35A of the Banking Regulation Act 1949 (As Applicable to Cooperative Societies) vide order dated January 25, 2005 placing a ceiling on repayment of deposits upto Rs. 1000/- per depositor. The statutory inspection of the bank conducted by RBI with reference to its financial position as on March 31, 2006 revealed that the bank’s financial position had further deteriorated and its realisable value of capital and reserves (Net Worth) had become negative. Next inspection of the bank with reference to financial position as on March 31, 2007 revealed further deterioration in the financial position. As the realisable value of bank's paid-up capital and reserves was negative and the chances of its revival were remote,

2. In case of The Maratha Co-operative Bank Ltd., Hubli, (Karnataka) licence to the bank cancelled after the close of business on January 29, 2008. The Registrar of Co-operative Societies, Karnataka has also been requested to issue an order for winding up the bank and appoint a Liquidator for the bank. The Maratha Co-operative Bank Ltd., Hubli, Karnataka State was granted a licence on January 8, 1988 by the Reserve Bank of India to conduct banking business. The inspection of the bank conducted under Section 35 of the Act, with reference to its financial position as on March 31, 2003 revealed deterioration in the financial position of the bank. The gross and net Non Performing Assets of the bank were very high and the bank was facing liquidity crisis and was not in a position to pay the matured deposits. The bank was placed under directions under Section 35A of the Act vide orders dated January 21, 2004 restricting its operations, including placing a ceiling on withdrawal of deposits of Rs.1,000/- per depositor. The subsequent inspections conducted with respect to financial position as on March 31, 2006 and March 31, 2007 revealed that the bank's position was precarious.

It may be highlighted that on liquidation every depositor is entitled to repayment of his deposits up to a monetary ceiling of Rs.1,00,000/- (Rupees One Lakh only) from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

For any clarifications, depositors may contact Urban Banks Department of Reserve Bank of India Ahmedabad & Bangalore respectively.



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