Reserve Bank Cancels the Licence of The Katkol Co-operative Bank Ltd., Katkol, Karnataka

Case Brief

The Reserve Bank of India cancelled the banking licence of The Katkol Co-operative Bank Ltd., Katkol, Karnataka, with effect after close of business on July 03, 2009. The action followed statutory inspections that found severe liquidity problems, further deterioration in the bank's financial position, and a precarious solvency situation. Earlier directions under Section 35A had been imposed in 2006 to protect depositor interests, but revival efforts, including possible merger discussions, did not succeed. The RBI also requested the Registrar of Co-operative Societies, Karnataka to initiate winding up and appoint a liquidator. With the cancellation, the bank is prohibited from carrying on banking business, including accepting and repaying deposits, and depositors are to be paid insured amounts through DICGC during liquidation.