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The Reserve Bank of India delivered the order canceling the licence of the Primary Teachers Co-operative Credit Bank Ltd., Nipani, (Karnataka) after the close of business on October 06, 2008. The bank 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 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/- from the Deposit Insurance and Credit Guarantee Corporation (DICGC).
The bank was granted a licence by the Reserve Bank on December 19, 1986 to commence banking business. The statutory inspection conducted by the Reserve Bank with reference to its financial position as on March 31, 2005 revealed drastic deterioration of the financial position of the bank compared to the previous one conducted with reference to position as on December 31, 2004. Operational instructions were issued to the bank restricting its lending activities. The subsequent inspection conducted with respect to position as on March 31, 2006 revealed that the bank's financial position had deteriorated further. The bank had not lodged any police complaint for the frauds amounting to Rs.109.99 lakh perpetrated by the ex-CEO of the bank, despite being advised by RBI. In view of the critical liquidity position, in public interest and in the interest of the depositors, to prevent preferential payment and to preserve the assets of the bank, the bank was placed under directions under Section 35A of the Act vide directive dated July 23, 2007 prohibiting it from sanctioning/ renewing of loans and advances, making investments, borrowings and acceptance of fresh deposits. A cap of Rs.1000/- per depositor was placed on withdrawal of deposits.
The latest inspection with respect to position as on March 31, 2007 conducted during March 13 to March 18, 2008 had revealed that the financial position of the bank had deteriorated further. A show cause notice (SCN) for cancellation of licence was issued on June 25, 2008. In its reply to the SCN the bank stated that the misappropriation of funds by the erstwhile CEO was the major cause for the present state of affairs of the bank and that the various efforts made by it for revival of the bank and to find another co-operative bank for merger of this bank were all in vain. It therefore sought liquidation of the bank.
After taking into account the foregoing and after examining all options for its revival, the Reserve Bank of India took the extreme measure of canceling the licence of the bank 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 Primary Teachers Co-operative Credit Bank Ltd., the amount insured as per the DICGC Act will be set in motion.
Consequent on cancellation of its licence, the bank is prohibited from carrying on 'banking business' as defined in Section 5(b) of the Banking Regulation Act, 1949(AACS) including acceptance and repayment of deposits.
For any clarifications, depositors may approach Shri V. Satya Prasad, General Manager, Urban Banks Department, Reserve Bank of India, Bangalore. His contact details are postal address: 10/3/8, Nrupathunga Road, Bangalore 560 001, Tel. No (080) 2221 3033, Fax : (080) 2229 3668/2221 0185 or for email click here.
G. Raghuraj
Deputy General Manager
Press Release : 2008-2009/471 |