Licence of Bhavnagar Mercantile Co-operative Bank Ltd., Bhavnagar – Cancelled

Case Brief

The Reserve Bank of India ordered the cancellation of the licence of Bhavnagar Mercantile Co-operative Bank Ltd., Bhavnagar, effective after close of business on December 10, 2008. RBI said the bank had ceased to be solvent, revival efforts in consultation with the Government of Gujarat had failed, and the depositors were facing continued uncertainty. The bank had earlier been placed under directions, and its Board of Directors had been superseded; subsequent inspections showed the bank’s financial position remained unsound/precarious. After issuing a show-cause notice and examining the reply, RBI found no viable plan for revival or regulatory compliance and therefore cancelled the licence. RBI also asked the Registrar of Co-operative Societies, Gujarat to issue winding-up orders and appoint a liquidator. Consequent to cancellation, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and depositor repayment will proceed under the Deposit Insurance Scheme subject to applicable terms and conditions.