This week was really bad for Urban Cooperative Banks and its innocent depositors when licence of two Urban Cooperative bank was cancelled. The Reserve Bank of India delivered the order cancelling the licence of Bhandari Co-operative Bank,Mumbai and Charminar Co-operative Urban Bank Ltd., (Andhra Pradesh). The Registrar of Co-operative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator for the Bhandari Cooperative bank. The bank was granted a licence by Reserve Bank on October 26, 1987 to commence banking business. The statutory inspection of the bank revealed that the assessed networth of the bank was negative and the bank’s deposits had eroded to the extent of 0.5%. In view of the precarious financial position as revealed by the findings of the inspection with reference to its financial position as on March 31, 2011, and inability of the management to bring about any improvement, the bank has been placed under all-inclusive directions with effect from the close of business on August 11, 2011, for a period of six months. The management had not displayed sufficient firmness or seriousness in dealing with the recalcitrant officers responsible for the irregularities in auto and housing loan accounts and also recovery of core NPAs. The Board of Directors was ineffective and was responsible for deterioration in the financial position of the bank and for conducting the affairs of the bank in a manner detrimental to the interest of the depositors. In the second case RBI cancelled the licence of Charminar Co-operative Urban Bank Ltd., (Andhra Pradesh) since close of business on November 15, 2011. The Registrar of Co-operative Societies, Andhra Pradesh State has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank. The bank was granted a license by Reserve Bank on September 24, 1985 to commence banking business. The scrutiny conducted by RBI revealed that the bank was not in a position to meet the demand of its depositors. The bank’s Board was superseded on March 2, 2002 and Registrar of Co-operative Societies (RCS), Andhra Pradesh appointed a Persons-in-Charge (PIC) Committee to manage the affairs of the bank. With a view to restructure and revive the bank, the Government of Andhra Pradesh notified a Scheme of Reconstruction in consultation with RBI which came into force with effect from March 3, 2003. The Scheme, however, failed to yield the desired results. The subsequent inspections of the bank also revealed no improvement in its financial position. The statutory inspection of the bank conducted with reference to its financial position as on March 31, 2010 and the scrutiny carried out with reference to its financial position as on March 31, 2011 revealed no improvement in the functioning of the bank. The Reserve Bank of India issued a show cause notice to the bank on July 14, 2011, asking it to show cause as to why the license granted to it to conduct banking business should not be cancelled. In the reply to the show cause notice, the bank has not submitted any action plan for revival and its reply to the show cause notice was not found satisfactory. In the absence of any viable action plan to turnaround, Reserve Bank of India took the extreme measure of canceling the license of the bank in the interest of the bank’s depositors.
Bad week for Urban Cooperative banks
This week was really bad for Urban Cooperative Banks and its innocent depositors when licence of two Urban Cooperative bank was cancelled. The Reserve Bank of India delivered the order cancelling the licence of Bhandari Co-operative Bank,Mumbai and Charminar Co-operative Urban Bank Ltd., (Andhra Pradesh).
The Registrar of Co-operative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator for the Bhandari Cooperative bank.
The bank was granted a licence by Reserve Bank on October 26, 1987 to commence banking business.
The statutory inspection of the bank revealed that the assessed networth of the bank was negative and the bank’s deposits had eroded to the extent of 0.5%.
In view of the precarious financial position as revealed by the findings of the inspection with reference to its financial position as on March 31, 2011, and inability of the management to bring about any improvement, the bank has been placed under all-inclusive directions with effect from the close of business on August 11, 2011, for a period of six months.
The management had not displayed sufficient firmness or seriousness in dealing with the recalcitrant officers responsible for the irregularities in auto and housing loan accounts and also recovery of core NPAs.
The Board of Directors was ineffective and was responsible for deterioration in the financial position of the bank and for conducting the affairs of the bank in a manner detrimental to the interest of the depositors.
In the second case RBI cancelled the licence of Charminar Co-operative Urban Bank Ltd., (Andhra Pradesh) since close of business on November 15, 2011. The Registrar of Co-operative Societies, Andhra Pradesh State has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank.
The bank was granted a license by Reserve Bank on September 24, 1985 to commence banking business.
The scrutiny conducted by RBI revealed that the bank was not in a position to meet the demand of its depositors. The bank’s Board was superseded on March 2, 2002 and Registrar of Co-operative Societies (RCS), Andhra Pradesh appointed a Persons-in-Charge (PIC) Committee to manage the affairs of the bank.
With a view to restructure and revive the bank, the Government of Andhra Pradesh notified a Scheme of Reconstruction in consultation with RBI which came into force with effect from March 3, 2003. The Scheme, however, failed to yield the desired results. The subsequent inspections of the bank also revealed no improvement in its financial position.
The statutory inspection of the bank conducted with reference to its financial position as on March 31, 2010 and the scrutiny carried out with reference to its financial position as on March 31, 2011 revealed no improvement in the functioning of the bank.
The Reserve Bank of India issued a show cause notice to the bank on July 14, 2011, asking it to show cause as to why the license granted to it to conduct banking business should not be cancelled.
In the reply to the show cause notice, the bank has not submitted any action plan for revival and its reply to the show cause notice was not found satisfactory. In the absence of any viable action plan to turnaround, Reserve Bank of India took the extreme measure of canceling the license of the bank in the interest of the bank’s depositors.