Reserve Bank Cancels the Licence of Bharat Urban Co-operative Bank Ltd., Solapur (Maharashtra)

Case Brief

The Reserve Bank of India cancelled the licence of Bharat Urban Co-operative Bank Ltd., Solapur (Maharashtra) with effect from the close of business on November 25, 2011. RBI said the bank had ceased to be solvent, revival attempts in consultation with the Government of Maharashtra had failed, and the continued uncertainty was inconveniencing depositors. The release describes severe deterioration in the bank’s financial condition, including negative net worth, negative CRAR, high NPAs, and large losses. It also records non-compliance with sections 11(1), 22(3)(a), 22(3)(b) and 24 of the Banking Regulation Act, 1949 (as applicable to co-operative societies), and states that the board was ineffective and had conducted the affairs of the bank in a manner detrimental to depositors’ interests. As no viable merger or restructuring plan was received, RBI took the extreme step of cancelling the licence and requested the Registrar of Co-operative Societies, Maharashtra to wind up the bank and appoint a liquidator. The release further notes that depositors may be eligible for insurance coverage up to Rs 1,00,000 under the DICGC scheme.