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In view of the fact that the The Challakere
Urban Co-operative Bank Ltd., Challakere (Karnataka) had ceased to be solvent,
all efforts to revive it in close consultation with the Government of Karnataka
had failed and the depositors of the bank were being inconvenienced by continued
uncertainty, the Reserve Bank of India delivered the order, canceling its licence
to the bank after the close of business on August 02, 2006. The Registrar of
Co-operative Societies, Karnataka has also been requested to issue an order
for winding up of the bank and appoint a Liquidator for the bank. It may be
highlighted that on liquidation every depositor is entitled to repayment of
his deposits up to a monetary ceiling of Rs.1,00,000/- (Rupees One lakh only)
from the Deposit Insurance and Credit Guarantee Corporation (DICGC).
The bank was granted a licence by Reserve Bank
on December 9, 1987 to commence banking business. The statutory inspection of
the bank conducted with reference to its financial position as on September
30, 2003 conducted under Section 35A of the Banking Regulation Act 1949(As Applicable
to Co-operative Societies) revealed several irregularities in the functioning
of the bank. Due to these irregularities Registrar of Cooperative Societies
(RCS) for Karnataka superseded the Board of Directors on October 27, 2003.
The scrutiny of the books of accounts of the
bank conducted by Reserve Bank of India during August 2004 revealed deterioration
in the financial position of the bank. The bank was facing liquidity problems.
In order to protect the interests of the depositors, the bank was placed under
directions issued under Section 35A of the B. R. Act, 1949(AACS) with effect
from October 30, 2004 restricting its activities including imposing ceiling
on repayment of deposits upto Rs.1000/- per depositor.
The subsequent inspection of the bank conducted
by Reserve Bank of India with reference to its financial position as on March
31, 2005 revealed further deterioration in the realizable value of capital and
reserves leading to erosion of deposits to the extent of 100.00% of its total
deposits. The Reserve Bank issued a notice to the bank on April 13, 2006 asking
it to show cause as to why the licence granted to it under Section 22 of the
B. R. Act,1949(AACS) on December 9, 1987 to conduct banking business should
not be cancelled. The bank's reply to the Show Cause Notice was examined and
was found unacceptable.
As the realizable value of bank's paid-up capital
and reserves was negative and the chances of its revival were remote in the
absence of a viable action plan, the Reserve Bank of India took the extreme
measure of canceling licence of the bank after examining all options for its
revival, in the interest of the bank's depositors. With the cancellation of
its licence and commencement of liquidation proceedings, the process of paying
the depositors of The Challakere Urban Co-operative Bank Ltd., the amount insured
as per the DICGC Act will be set in motion.
3. Consequent to the cancellation of its licence,
the The Challakere Urban Co-operative Bank Ltd., is prohibited from carrying
on 'banking business' as defined in Section 5(b) of the B. R. Act, 1949 (AACS)
including acceptance and repayment of deposits.
For any clarifications, depositors may approach
Shri C.R.G.Nair, Deputy General Manager, Urban Banks Department, Reserve Bank
of India, Bangalore. His contact details are as below:
Postal Address: 10/3/8, Nrupathunga
Road, Bangalore 560 001. Telephone Number: (080) 22291696; Fax Number: (080)
22293668/22210185;
G. Raghuraj
Deputy General Manager
Press Release : 2006-2007/172
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