The Reserve Bank of India,
has on June 7, 2005, cancelled the licence granted to The Century Co-operative
Bank Ltd., Surat, Gujarat, in view of the fact that it had ceased to be solvent.
The order canceling its licence was delivered to the bank on June 10, 2005 at
10.00 a.m. A requisition has been made to the Registrar of Co-operative Societies,
Gujarat for winding up of The Century Co-operative Bank Ltd., Surat, Gujarat
and to appoint a liquidator therefor. It may be highlighted that on liquidation
of the bank every depositor is covered by the Deposit Insurance and Credit Guarantee
Corporation (DICGC) and is entitled to repayment of his deposits up to a monetary
ceiling of Rs.1,00,000.
Earlier, an inspections of
the bank conducted by the Reserve Bank of India with reference to its financial
position as on March 31, 2003 revealed that the bank had sanctioned large amounts
of temporary overdrafts and unsecured advances, which accounted for 40.4 per
cent of its total advances. The bank was accordingly advised to regularise the
position and send a report to the Reserve Bank of India as on September 30,
2003. However, the bank did not provide any satisfactory reply. Subsequently,
a scrutiny of the bank's books of accounts was conducted by the Reserve Bank
of India, which revealed that the bank had allowed large unsecured advances
in the nature of overdrafts in current accounts violating the Reserve Bank's
directives. On August 31, 2004 the bank failed to meet its clearing liability
and was suspended from the Surat Clearing House triggering a run on its deposits.
The bank's liquidity position deteriorated and it was placed under directions
under Section 35A of the Banking Regulation Act, 1949 (AACS) with effect from
the close of business as on September 10, 2004 imposing, inter-alia, restrictions
on acceptance and repayment of deposits.
A subsequent inspection of
the bank conducted with reference to its position as on September 30, 2004,
revealed further deterioration in its financial position. Its financial parameters
were found to be severely impaired. On account of high NPAs, its Net Worth and
CRAR had turned negative and a significant portion of its deposits had been
eroded. The bank had also violated a number of guidelines/directives of the
Reserve Bank. A notice was, therefore, issued to the bank on February 4, 2005,
asking it to show cause as to why the licence granted to it for carrying on
banking business should not be cancelled. The bank's reply to the notice was
examined but was found not satisfactory. The Reserve Bank of India, therefore,
took the extreme measure of canceling the licence of the bank in the interest
of the bank's depositors.
Following the cancellation
of its licence, the Century Co-operative Bank Ltd., Surat is prohibited from
carrying on banking business as defined in Section 5(b) of the Act ibid, including
acceptance and repayment of deposits. After the liquidation proceedings are
initiated by the Government of Gujarat, the process of paying the depositors
of The Century Co-operative Bank Ltd., Surat, Gujarat, the amount insured as
per the DICGC Act will be set in motion.
For any clarifications, depositors
may approach the General Manager, Urban Banks Department, Reserve Bank of India,
Ahmedabad on contact details as below :
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Post Address
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Urban Banks Department, Reserve
Bank of India, La Gajjar Chambers, Ashram Road, P.B. No.1, Ahmedabad-380
009
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Telephone Number
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(079) 2658 – 2360, 3650,
4039, 6019, 7324-25, 7614 and 26589338
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Fax Number
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(079) 26584853
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P. V. Sadanandan
Manager
Press Release: 2004-2005/1304
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