Reserve Bank Cancels the Licence of Veershaiva Co-operative Bank Ltd., Mumbai (Maharashtra)

Case Brief

The Reserve Bank of India cancelled the licence of Veershaiva Co-operative Bank Ltd., Mumbai (Maharashtra), with effect from the close of business on December 30, 2011. RBI said the bank had ceased to be solvent, attempts to revive it in consultation with the Government of Maharashtra had failed, and continued uncertainty was inconveniencing depositors. The release cites persistent deterioration in the bank’s financial condition, including negative net worth, negative CRAR, heavy losses, and very high NPAs, along with poor governance and ineffective board oversight. RBI had earlier issued supervisory instructions, later all-inclusive directions under Section 35A, and a show-cause notice asking why the licence should not be cancelled and the bank taken to liquidation. As the bank’s response and revival prospects were unsatisfactory, RBI took the extreme measure of cancelling the licence and requested the Registrar of Co-operative Societies, Maharashtra, to wind up the bank and appoint a liquidator.