Case Brief
What Happened
RBI issued directions under Section 35A read with Section 56 of the Banking Regulation Act, 1949 to The Hiriyur Urban Co-operative Bank Ltd., Hiriyur, Chitradurga District, effective from the close of business on March 10, 2023. The order bars the bank, without prior RBI approval, from granting or renewing loans and advances, making investments, incurring liabilities including borrowing and acceptance of fresh deposits, disbursing payments, entering into compromise or arrangement, and selling or otherwise disposing of assets except as permitted in the direction. Owing to the bank's liquidity position, depositor withdrawals from savings, current, and other accounts are not permitted, although set-off of loans against deposits is allowed subject to conditions. The RBI clarified that the directions do not themselves amount to cancellation of the banking licence and will remain in force for six months, subject to review and possible modification.