Case Brief
What Happened
RBI issued directions under Section 35A of the Banking Regulation Act, 1949 read with Section 56 to Banaras Merchantile Co-operative Bank Ltd., Varanasi. Effective from the close of business on March 03, 2023, the bank was restricted from granting or renewing loans and advances, making investments, incurring liabilities (including borrowings and acceptance of fresh deposits), disbursing payments, entering into compromises/arrangements, and selling or otherwise disposing of assets except as specifically permitted. In view of the bank's liquidity position, depositor withdrawals from savings, current, or other accounts were also not allowed, although loan set-off against deposits could be done under stated conditions. RBI clarified that the directions do not amount to cancellation of the banking licence and that the bank may continue operating with restrictions until its financial position improves, subject to review and possible modification.