Reserve Bank Cancels the Licence of Shri Bhadran Mercantile Co-operative Bank Ltd., Bhadran (Gujarat)

Case Brief

The Reserve Bank of India cancelled the banking licence of Shri Bhadran Mercantile Co-operative Bank Ltd., Bhadran (Gujarat) after determining that the bank had ceased to be solvent and that efforts to revive it had failed. RBI noted severe financial deterioration, including negative net worth, negative CRAR, high NPAs, and deposit erosion, and stated that the bank was not in a position to pay its present and future depositors. The bank had earlier been placed under restrictions under Section 36(1) and later under Section 35A directions, which were extended before the final cancellation. RBI also issued a show-cause notice under Section 22 of the Banking Regulation Act, 1949 (AACS); the bank admitted irregularities but did not provide any concrete revival or merger proposal. As a result, RBI concluded that the bank's continuation would further erode deposits and be against public interest, and it prohibited the bank from carrying on banking business. The Registrar of Co-operative Societies, Gujarat State was requested to initiate winding-up and appoint a liquidator, with DICGC-insured repayment to depositors to follow subject to scheme conditions.