The Reserve Bank of India has, from the close of business as on September 19, 2014, cancelled the licence of the Ajmer Urban Co-operative Bank Ltd., Ajmer (Rajasthan) as it had ceased to be solvent, all efforts to revive it had failed and the depositors were being inconvenienced by continued uncertainty. The Registrar of Co-operative Societies, Rajasthan has also been requested to issue an order for winding up the bank and appoint a liquidator.

On liquidation, every depositor will be 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.

Consequent to the cancellation of its licence, The Ajmer Urban Co-operative Bank Ltd., Ajmer (Rajasthan) is prohibited from carrying on ‘banking business’ as defined in section 5(b) of the Act.

For any clarifications, depositors may approach Shri D. K. Meena, General Manager, Urban Banks Department, Jaipur Regional Office, Reserve Bank of India, Jaipur whose contact details are:

Postal Address: Urban Banks Department, Reserve Bank of India, 3rd Floor, Rambag Circle, Tonk Road, Jaipur–302 052; Telephone – (0141) 2564661, Fax – (0141) 2569693.

Background

The bank was granted a licence by the Reserve Bank on December 18, 2000 to commence banking business. The latest statutory inspection of the bank conducted under Section 35 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies) with reference to its financial position as on March 31, 2013,among other things, revealed that the real or exchangeable value of paid-up share capital and reserves of the bank was assessed at (-) ₹ 2628.47 lakh with erosion in the deposits to the extent of 32.67 per cent. The bank’s Capital to Risk-Weighted Assets Ratio (CRAR) was assessed at (-) 173.31per cent as against the regulatory requirement of 9 per cent, accumulated losses assessed as on March 31, 2013 stood at ₹ 3446.41 lakh and gross non-performing assets (NPAs) and net non-performing assets as on March 31, 2013 were assessed at ₹ 1361.52 lakh (57.59 per cent of the gross loans and advances) and ₹ 154.02 lakh (13.31 per cent of the net advances), respectively. The net loss of the bank was assessed at ₹ 697.51 lakh during 2012-2013. In view of the large amount of NPAs, substantial accumulated losses, poor chances of recovery for improvement in financial health of the bank, revival prospects of the bank in the near future were bleak.

The Technical Advisory Committee [Task Forces for Urban Cooperative Banks (TAFCUB)] reviewed the position of the bank and revival proposals from time to time. Various merger proposals/options were explored by the bank at the instance of the State Federation. However, there was no positive outcome. In view of the persistent violations of the regulatory guidelines and continuous deterioration in the financial condition and also based on the financial position of the bank as on March 31, 2013, the bank was issued a Show Cause Notice (SCN) in January, 2014 as to why the licence granted to carry on banking business under Section 22 of the Banking Regulation Act should not be cancelled and the bank be taken into liquidation. The bank’s reply received in February, 2014 to the SCN was examined but was not found satisfactory. As the affairs of the bank were being conducted in a manner detrimental to the interests of the depositors, the Reserve Bank, took the extreme measure of cancelling the licence of the bank in the interest of the depositors of the bank.

Alpana Killawala

Principal Chief General Manager

Cancellation of banking licence: insolvency and regulatory breaches trigger prohibition on banking business and liquidation steps. The Reserve Bank cancelled the bank's licence due to insolvency, regulatory violations and failed revival efforts, requested the State Registrar to wind up the bank and appoint a liquidator, prohibited the bank from carrying on 'banking business' under section 5(b), and indicated that on liquidation depositors will be entitled to repayment of insured deposits from the DICGC under usual terms.