Recorded RBI impact
Business restriction
Business restriction · Fresh imposition
Published by RBI
9 Nov 2017
Case Brief
The Reserve Bank of India issued Directions to Karad Janata Sahakari Bank Ltd., Karad, Dist: Satara, Maharashtra, under Section 35A of the Banking Regulation Act, 1949 read with Section 56. Effective from the close of business on November 09, 2017, the bank’s depositors were permitted to withdraw only up to ₹1,000 per account, subject to the RBI’s conditions. The bank was also prohibited, without prior written approval from RBI, from granting or renewing loans and advances, making investments, incurring liabilities including borrowings and acceptance of fresh deposits, disbursing payments, entering into compromises/arrangements, or disposing of assets except as notified in the RBI directions. RBI stated that this should not be construed as cancellation of the banking licence and that the bank would continue banking business with restrictions until its financial position improves.
Why RBI Acted
RBI placed Karad Janata Sahakari Bank Ltd. under Directions under Section 35A of the Banking Regulation Act, 1949 read with Section 56. Depositors were allowed to withdraw only up to ₹1,000 per savings/current/other deposit account subject to conditions, and the bank could not, without prior written approval of RBI, grant or renew loans and advances, make investments, incur liabilities including borrowings and acceptance of fresh deposits, disburse payments, enter into compromises or arrangements, or sell/transfer/dispose assets except as permitted in the directions dated November 07, 2017.
Operating Impact
The bank remains operational but under severe constraints: depositors face withdrawal limits, and the bank cannot expand lending, raise fresh deposits, borrow, or freely dispose of assets without RBI approval. These restrictions continue until RBI modifies them based on the bank’s financial condition; the effective date was the close of business on November 09, 2017.
Regulatory Basis
- Sub-section (1) of Section 35 A of the Banking Regulation Act, 1949
- Section 56 of the said Act
Action Facts
- Primary Impact
- Business restriction
- Order Date
- 7 Nov 2017
- Effective From
- 9 Nov 2017
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank