Banaras Merchantile Co-operative Bank Limited, Varanasi

RBI cancelled the licence of Banaras Merchantile Co-operative Bank Limited, Varanasi. The bank must cease banking operations immediately and winding-up proceedings are to be initiated.

The bank cannot undertake any banking activity from the effective date, including accepting deposits or repaying them as part of normal banking business. Depositors’ claims will move into liquidation/insurance resolution, with DICGC coverage up to ₹5 lakh per depositor subject to the applicable law. The state registrar is expected to initiate winding up and appoint a liquidator.

• Section 11(1) of the Banking Regulation Act, 1949
• Section 22(3)(d) read with Section 56 of the Banking Regulation Act, 1949
• Sections 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d) and 22(3)(e) read with Section 56 of the Banking Regulation Act, 1949

+2 more in the case brief

RBI imposed Section 35A directions on Banaras Merchantile Co-operative Bank Ltd., Varanasi, limiting core banking operations and blocking withdrawals subject to conditions. The bank may continue business only within these restrictions.

The bank must operate under tight RBI-imposed restrictions for six months from the close of business on March 03, 2023, unless modified earlier. Depositors face withdrawal limits, while the bank cannot freely extend credit, raise liabilities, accept fresh deposits, or dispose of assets without approval. Eligible depositors may claim deposit insurance up to ₹5 lakh subject to DICGC provisions and required willingness submission.

• Section 35 A of the Banking Regulation Act, 1949
• Section 56 of the Banking Regulation Act, 1949
• Section 18A of the DICGC Act (amendment) 2021

RBI imposed a penalty of Rs 1.5 lakh on Banaras Mercantile Co-operative Bank Ltd., Varanasi. The action was for breaches of supervisory instructions, prudential exposure norms, and KYC guidelines.

The bank must absorb the monetary penalty of Rs 1.5 lakh; the release does not describe any operational restriction, suspension, or license action. The forward-looking impact is limited to the financial penalty and compliance signalling for the bank.

• Section 47A(1)(c)
• Section 46(4)
• Section 36(1)