Reserve Bank Cancels the license of The Charminar Co-operative Urban Bank Ltd., Hyderabad (Andhra Pradesh)

Case Brief

The Reserve Bank of India cancelled the banking licence of The Charminar Co-operative Urban Bank Ltd., Hyderabad (Andhra Pradesh), effective after the close of business on November 15, 2011. RBI said the bank had ceased to be solvent, efforts to revive it had failed, and continued uncertainty was inconveniencing depositors. The order also noted that the bank’s financial position had not improved over time: its net worth and CRAR were deeply negative, the entire loan portfolio was impaired, and the deposits were considered eroded. RBI found violations of Sections 11(1), 22(3)(a) and 22(3)(b) of the Banking Regulation Act, 1949 (as applicable to co-operative societies), and stated that the bank was unable to pay depositors in full as claims accrued and was conducting its affairs detrimentally to depositors. After an unsatisfactory reply to a show-cause notice, RBI cancelled the licence and asked the Registrar of Co-operative Societies, Andhra Pradesh to initiate winding up and appoint a liquidator.