Case Brief
What Happened
RBI issued directions under Section 35A of the Banking Regulation Act, 1949 read with Section 56 to The Shirpur Merchants’ Co-operative Bank Ltd., Shirpur. Effective from the close of business on April 08, 2024, the bank cannot, without prior written RBI approval, 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 except as specifically allowed in the direction. In addition, the bank’s depositors cannot withdraw amounts from savings, current, or other accounts except under the stated conditions, though set-off of loans against deposits is permitted subject to those conditions. RBI attributed the action to the bank’s present liquidity position and clarified that the order is not a cancellation of banking licence; the bank may continue banking business with restrictions until its financial position improves. The directions are valid for six months from the close of business on April 08, 2024, and are subject to review.