RBI delivered its order cancelling the Bank licence on 30/08/2012, as the bank was not in a position to pay its present and future depositors.
Registrar of Co-operative Societies, Pune has also been advised to issue an order for winding up the bank and appoint liquidator for the bank.
As is the norm, on liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of `1,00,000/- (Rupees one lakh only) from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under usual terms and conditions.
The bank was granted a licence by RBI on December 15, 1997 under Section 22 of the Banking Regulation Act, 1949.
Over the years, RBI in its statutory inspection reports highlighted the need to improve its financial position. However there was no improvement, and the latest statutory inspection of the bank with reference to its position as on March 31, 2011 revealed sharp deterioration in the financial position of the bank.
Year-on-year, the losses only increased, i.e from Rs58.32 lakh during 2009-10 to Rs129.27 lakh during 2010-11 whereas assessed accumulated losses of the bank increased from Rs68.68 lakh as on March 31, 2010 to Rs133.87 lakh as on March 31, 2011. The deposit erosion increased from 11.9% as on March 31, 2010 to 52.8% as on March 31, 2011
Keeping in view the deterioration in the financial position of the bank a Show Cause Notice (SCN) dated May 17, 2012 was issued to the bank requiring it to show cause as to why the licence granted to it under Section 22 of the B. R. Act on December 15, 1997 to carry on banking business should not be cancelled and the bank be taken into liquidation. The bank’s reply dated June 20, 2012 to the SCN was examined but was not found to be satisfactory. Further, no concrete proposal for merger/ revival of the bank was received.
Hence, RBI took the extreme step of cancellation of the Bank’s licence. Rajiv Gandhi Sahakari Bank Ltd., Latur (Maharashtra) is prohibited from carrying on business of ‘banking’ as defined in Section 5(b) of the Banking Regulation Act, 1949 (AACS).
What does the DICGC insure?
The DICGC insures all deposits such as savings, fixed, current, recurring, etc. deposits except the following types of deposits
(i) Deposits of foreign Governments;
(ii) Deposits of Central/State Governments;
(iii) Inter-bank deposits;
(iv) Deposits of the State Land Development Banks with the State co-operative bank;
(v) Any amount due on account of and deposit received outside India
(vi) Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India
Re-disseminated by Prashant N. Banker by daytime,Blogger by night.
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