Reserve Bank rejected the application for grant of licence of Karnataka Rajya Kaigarika Vanijya Sahakara Bank Niyamitha, Bangalore, (Karnataka)
RBI delivered the order rejecting the application after being satisfied that the bank does not fulfill the conditions as required in terms of Section 22(3) of the Act.
The order is effective from the close of business on March 25, 2014 and makes it obligatory on the part of the bank to stop conducting the business of “banking” within the meaning of Section 5 (b) of the Act, with immediate effect.
The Registrar of Co-operative Societies, Karnataka has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank..
The Board for Financial Supervision (BFS), in its 171st meeting held on August 12, 2009, had directed that there should be no unlicenced bank as on March 31, 2010 and for this limited purpose, as a one-time measure and for a limited period, the Capital to Risk Assets Ratio (CRAR) was prescribed at a minimum of 2% as against the regulatory requirement of 9%.
However, the bank was not able to achieve minimum CRAR of 2% as on March 31, 2010 for considering its application for grant of banking licence. The position was also brought to the notice of the State Government and concerns of RBI had been brought to the attention of various stakeholders, through the Task Force for Urban Co-operative Banks (TAFCUB), read An RBI press release.
The Gross NPAs of the bank were Rs 2017.98 lakh forming 15.2% of its gross advances. The bank was not submitting CTR/STR reports to FIU (IND) New Delhi, and was not strictly adhering to KYC guidelines.
A large number of frauds were reported at various branches. The financial position of the bank was reviewed in the 55th meeting of TAFCUB held on November 10, 2011. In view of the assurance given by the bank to make a turnaround and achieve minimum CRAR by selling its prime properties, it was decided to give it time up to March 31, 2012.
The financial position as on March 31, 2012 did not show any improvement. The bank had violated Operational Instructions issued by RBI by sanctioning unsecured loans.
In the TAFCUB meeting, RCS assured to explore all the possibilities of raising capital viz. infusion of capital by State Government, sale of immovable assets, conversion of deposits into shares etc. The bank was again advised to focus its attention on improving the CRAR to the minimum by the end of March 31, 2013.
The bank continued to violate Section 6 of the Act, by letting out its premises at Bidar and Hassan..
The bank’s reply dated January 31, 2014 was examined but not found to be satisfactory and thus this decision.