Recorded RBI impact
Business restriction
Business restriction · Fresh imposition
Published by RBI
15 Apr 2024
Case Brief
RBI issued fresh directions under Section 35A read with Section 56 of the Banking Regulation Act, 1949 to National Urban Co-operative Bank Ltd., Pratapgarh (Uttar Pradesh), effective from the close of business on April 15, 2024. The directions restrict the bank 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 compromises/arrangements, and disposing of assets except as permitted. Depositors may withdraw up to ₹10,000 from the total balance across accounts, subject to stated conditions, and eligible depositors may also access deposit insurance claim amounts up to ₹5,00,000 under DICGC provisions. RBI clarified that this is not a cancellation of banking licence and that the bank will continue to undertake banking business with restrictions until its financial position improves, subject to review after six months.
Why RBI Acted
Under Section 35A of the Banking Regulation Act, 1949 read with Section 56, RBI issued directions to National Urban Co-operative Bank Ltd., Pratapgarh (Uttar Pradesh), effective from close of business on April 15, 2024. The bank was barred 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/arrangements, and selling/transferring/disposal of assets except as permitted. Depositors were permitted to withdraw up to ₹10,000 across all accounts, subject to conditions. RBI stated the directions were not a cancellation of licence and would remain in force for six months, subject to review.
Operating Impact
The bank must operate under RBI-imposed restrictions from April 15, 2024, limiting its lending, deposit-taking, liability creation, payment activity, and asset disposal. Depositors are directly affected by the withdrawal cap, though eligible depositors may claim deposit insurance up to ₹5 lakh under DICGC provisions. The directions remain in force for six months unless modified or reviewed by RBI.
Regulatory Basis
- Section 35A of the Banking Regulation Act, 1949
- Section 56 of the Banking Regulation Act, 1949
- Section 18A of the DICGC Act (amendment) 2021
Action Facts
- Primary Impact
- Business restriction
- Order Date
- 15 Apr 2024
- Effective From
- 15 Apr 2024
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank