Case Brief
What Happened
RBI issued directions under Section 35A of the Banking Regulation Act, 1949 read with Section 56 to Shimsha Sahakara Bank Niyamitha, Maddur, Mandya District, effective from the close of business on February 24, 2023. The directions broadly restricted the bank's operations: it could not grant or renew loans and advances, make investments, incur liabilities including borrowings and acceptance of fresh deposits, disburse or agree to disburse payments, enter into compromises or arrangements, or sell/transfer/dispose of assets without prior written RBI approval, except as permitted in the directive. Due to liquidity concerns, depositors were not allowed to withdraw amounts from their accounts, although loan set-off against deposits was permitted under stated conditions. RBI also clarified that the order did not amount to cancellation of the banking licence, and that the directions would remain in force for six months from the close of business on February 24, 2023, subject to review.