Reserve Bank Cancels the Licence of The Merchants’ Co-operative Bank Ltd., Dhule (Maharashtra)

Case Brief

RBI cancelled the banking licence of The Merchants’ Co-operative Bank Ltd., Dhule (Maharashtra) with effect from the close of business on August 30, 2014. The order followed findings that the bank had ceased to be solvent, revival efforts with the Government of Maharashtra had failed, and depositors were being affected by prolonged uncertainty. The release details extensive adverse inspection findings: negative assessed capital, erosion in deposits, CRAR far below the regulatory requirement, accumulated losses, very high gross and net NPAs, defaults in CRR/SLR maintenance, non-publication of statutory auditor’s reports in the prescribed manner, non-maintenance of mandated government securities, large exposure to an ex-director and related parties, and unsatisfactory board oversight. RBI also notes earlier supervisory action, imposition and repeated extension of All-Inclusive Directions under Section 35A, issuance of a show-cause notice, and the absence of any viable revival or merger proposal. Consequent to cancellation, liquidation proceedings were initiated and the bank was prohibited from carrying on banking business; depositors would be eligible for DICGC insurance subject to the scheme’s terms.