Recorded RBI impact
Business restriction
Business restriction · Fresh imposition
Published by RBI
4 Nov 2011
Case Brief
RBI issued directions under Section 35A of the Banking Regulation Act, 1949 (AACS) read with Section 56 to Khedbrahma Nagarik Sahakari Bank Ltd., Khedbrahma, District Sabarkantha, Gujarat. From the close of business on October 31, 2011, the bank could not, without prior RBI approval, grant or renew loans and advances, make investments, incur liabilities including borrowings and fresh deposits, disburse payments, enter into compromises or arrangements, or sell/transfer/dispose of assets except as permitted under the RBI directions dated October 24, 2011. RBI stated that the directions were not, per se, a cancellation of banking licence, and the bank would continue to undertake banking business subject to the restrictions until its financial position improved.
Why RBI Acted
The Reserve Bank of India issued directions under sub-section (1) of Section 35A of the Banking Regulation Act, 1949 (AACS) read with Section 56 against Khedbrahma Nagarik Sahakari Bank Ltd., Khedbrahma, Sabarkantha, Gujarat. With effect from the close of business on October 31, 2011, the bank was prohibited from 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/transferring/disposing of properties or assets, except as notified in the RBI directions dated October 24, 2011. RBI also clarified that these directions should not be construed as cancellation of banking licence.
Operating Impact
The bank’s management must operate within RBI’s restrictions and seek prior approval for the listed activities. Customers may face limits on new lending, deposit-taking, payments, and asset-related transactions until the restrictions are relaxed or withdrawn. The effective date specified is the close of business on October 31, 2011.
Regulatory Basis
- Section 35A of the Banking Regulation Act, 1949 (AACS)
- Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Business restriction
- Order Date
- 24 Oct 2011
- Effective From
- 31 Oct 2011
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank