Case Brief
What Happened
RBI issued directions under Section 35A of the Banking Regulation Act, 1949 read with Section 56 to Musiri Urban Co-operative Bank Ltd., Musiri. Effective from the close of business on March 03, 2023, the bank was barred from undertaking several activities without prior written approval of RBI, including granting or renewing loans and advances, making investments, incurring liabilities (including borrowings and acceptance of fresh deposits), disbursing payments, entering compromises or arrangements, and selling or transferring assets. The directive also restricted withdrawals to a maximum of ₹5,000 across savings, current, or other accounts per depositor, subject to conditions in the RBI order. RBI clarified that this was not a cancellation of the banking licence and that the bank would continue business under restrictions for six months, subject to review and possible modification.