“Consequent to the cancellation of its licence, Shri Bhadran Mercantile Cooperative Bank is prohibited from carrying on business of banking,” RBI said.
The Reserve Bank of India (RBI) has cancelled the licence of Gujarat-based Shri Bhadran Mercantile Cooperative Bank, following deterioration in its financial condition and save the interest of depositors.
The decision was taken in view of the fact that bank had ceased to be solvent, all efforts to revive it in close consultation with the government of Gujarat had failed and the depositors were being inconvenienced by continued uncertainty, RBI said in a statement.
“Consequent to the cancellation of its licence, Shri Bhadran Mercantile Cooperative Bank is prohibited from carrying on business of banking,” it said.
It may be highlighted that on liquidation, it said, every depositor is entitled to repayment of his or her deposits up to a monetary ceiling of Rs1 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). RBI took the extreme measure of cancelling the licence of the bank in the interest of bank's depositors, it said.
RBI had issued banking licence to Shri Bhadran Mercantile Cooperative Bank in 1986. The central bank in its assessment found that the cooperative bank is not in a position to pay its present and future depositors. It also found that the affairs of the bank are being conducted in a manner detrimental to the interest of the depositors and the financial position of the bank leaves no scope for its revival.
The statutory inspection carried out by the RBI found the net loss of the bank as on 31 March 2010 at Rs2.63 crore and the gross NPAs was 81.3% of the total advances.
As the financial position of the bank with reference to its position as on 31 March 2011 turned precarious and revealed further deterioration, the bank was placed under suspension for a period of six months from the close of business on 26 August 2011, it said.
It was extended for a further period of six months from the close of business on 26 February 2012, subject to review, it added.
All the banks can now transfer funds electronically through real time gross settlement system (RTGS) and national electronic funds transfer (NEFT)
To popularise electronic transfer of funds, the Reserve Bank of India (RBI) allowed regional rural banks (RRBs) and cooperative banks to participate in the centralised payment systems.
With this, all the banks can now transfer funds electronically through real time gross settlement system (RTGS) and national electronic funds transfer (NEFT).
At present, the centralised payment systems -- RTGS and NEFT can be accessed only by members that included public and private sector banks. As an exception, RRBs have been given access to the NEFT system through their sponsor banks. "On a review, it has been decided to expand the sub- membership route to enable all licensed banks to participate in NEFT and RTGS systems," RBI said in a notification.
NEFT, an electronic transfer of funds system meant for retail customers while RTGS system facilitates high-value transfer of money with threshold limit of Rs2 lakh. This would be an alternate mechanism to all licensed banks which have the technological capabilities but are not participating in centralised payment systems on account of either not meeting the access criteria or because of cost considerations, it said.
Eliciting condition for such transactions, the notification said, the sub-member would participate in the centralised payment systems through their sponsor bank which is a direct member of the centralised payment system.
In order to ensure compliance with the timely credit and return discipline which are of utmost importance in centralised payment systems, branches of sub-member that are not under core banking system shall be kept out of the centralised payment systems till such time they are brought under core banking, it said.
The sponsor banks would be responsible for sending or receiving the transactions or messages on behalf of their sub-member, it added.
The charges, it said, for customer transactions of sub-member cannot exceed the charges applicable to customers of sponsor banks or direct members of the centralised payment systems.
“The ceiling for outstanding balance under the MSS (market stabilisation scheme) for the fiscal year 2012-13 has been fixed at Rs50,000 crore,” the RBI said in a statement
In order to absorb excess liquidity, the Reserve Bank has pegged the quantum of intervention through Market Stabilisation Scheme (MSS) at Rs50,000 crore.
Under the MSS, RBI, on behalf of government, absorbs liquidity by issuing Treasury Bills and/or dated securities.
“The ceiling for outstanding balance under the MSS for the fiscal year 2012-13 has been fixed at Rs50,000 crore,” the RBI said in a statement.
The MSS ceiling is the same as was fixed for last fiscal.
“This ceiling will be reviewed when the outstanding balance reaches the threshold limit of Rs35,000 crore,” RBI said.
The government launched MSS in consultation with RBI in 2004 with the objective to absorb excess liquidity, arising out of significant foreign exchange inflows, by issuing treasury bills or dated securities.
The Government issues treasury bills and/ or dated securities under the MSS. This is in addition to its normal borrowing requirements.
For the current fiscal, the government has pegged its borrowing requirements at Rs5.13 lakh crore. Of this, about 65% or Rs3.79 lakh would be borrowed in the April- September period.
During 2011-12, the government borrowed over Rs5.1 lakh crore from the market. The borrowing had exceeded the budgeted borrowing target by over Rs92,000 crore as high subsidy expenditure led to overshooting of government finances.