Reserve Bank Cancels the Licence of The Kanyaka Parameshwari Mutually Aided Co-operative Urban Bank Ltd., Andhra Pradesh

Case Brief

The Reserve Bank of India cancelled the licence of The Kanyaka Parameshwari Mutually Aided Co-operative Urban Bank Ltd., Kukatpally, R.R. District, Andhra Pradesh after concluding that the bank had ceased to be solvent and that revival was not feasible. The bank had earlier been placed under Section 35A directions in January 2005, and the Board of Directors had been superseded by the Registrar of Co-operative Societies in March 2005. RBI said the statutory inspection revealed violations of several RBI guidelines/instructions, liquidity stress following a run on deposits, and later deterioration in financial condition, including negative realizable value of paid-up capital and reserves. After the bank’s reply to the show-cause notice was found unacceptable, RBI cancelled the licence after close of business on August 16, 2006 and requested the Registrar to wind up the bank and appoint a liquidator. The release also notes that depositors will be entitled to insurance cover up to Rs. 1,00,000 under DICGC.