Recorded RBI impact
Business restriction
Business restriction · Fresh imposition
Published by RBI
15 Jun 2020
Case Brief
RBI issued directions to Karnala Nagari Sahakari Bank Ltd., Panvel, Raigad (Maharashtra) under Section 35A read with Section 56 of the Banking Regulation Act, 1949, effective from the close of business on June 15, 2020. The directions prohibit the bank’s Administrator from, without prior RBI approval in writing, granting or renewing loans and advances, making investments, incurring liabilities including borrowings and acceptance of fresh deposits, disbursing or agreeing to disburse payments, entering into compromises or arrangements, and selling or otherwise disposing of assets, except as specifically notified. Depositors are permitted to withdraw only up to ₹500 in total across savings, current, or other accounts. RBI clarified that the issuance of these directions should not be construed as cancellation of the bank’s licence and stated that the bank will continue banking business with restrictions until its financial position improves, with the directions remaining in force for six months subject to review.
Why RBI Acted
Under Section 35A read with Section 56 of the Banking Regulation Act, 1949, RBI issued directions to Karnala Nagari Sahakari Bank Ltd., Panvel, Raigad (Maharashtra), effective from the close of business on June 15, 2020. The bank’s Administrator cannot, without prior written RBI approval, grant or renew loans and advances, make investments, incur liabilities including borrowals and acceptance of fresh deposits, disburse payments, enter into compromises or arrangements, or sell/transfer/dispose of properties or assets except as permitted in the direction. Depositors may withdraw up to ₹500 from the total balance across all accounts, and the directions were stated to remain in force for six months and subject to review.
Operating Impact
The bank must operate under tight RBI supervision and cannot expand lending, take fresh deposits, or freely use its assets without approval. Depositors face a severe withdrawal cap, and the bank’s management must comply with the operational restrictions until RBI modifies or withdraws the directions, subject to review after six months.
Regulatory Basis
- Section 35 A of the Banking Regulation Act, 1949
- Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Business restriction
- Order Date
- 15 Jun 2020
- Effective From
- 15 Jun 2020
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank