Reserve Bank cancels the Licence of The Adarsh Mahila Co-operative Bank Ltd, Mehsana, Gujarat

Case Brief

The Reserve Bank of India cancelled the licence of The Adarsh Mahila Co-operative Bank Ltd., Mehsana, Gujarat on February 15, 2007. RBI said the bank had ceased to be solvent, had suffered a severe liquidity crunch, and revival efforts undertaken in consultation with the Government of Gujarat had failed. Inspection of the bank as on March 31, 2006 showed deterioration in financial condition, erosion of deposits, and negative realisable value of paid-up capital and reserves. Earlier, the bank had been placed under Directions under Section 35A of the Banking Regulation Act, 1949 (AACS) with effect from August 09, 2005, and RBI had issued a show-cause notice on August 22, 2005. RBI cancelled the licence as a final step to protect depositors and requested the Registrar of Co-operative Societies, Gujarat to initiate winding up and appoint a liquidator. The release also notes that the bank was prohibited from carrying on banking business, including acceptance and repayment of deposits, and that DICGC-insured amounts would be paid during liquidation proceedings.