Recorded RBI impact
Business restriction
Business restriction · Fresh imposition
Published by RBI
3 Jul 2015
Case Brief
The Reserve Bank of India imposed Directions on Shri Sai Urban Cooperative Bank Ltd., Mukhed, District Nanded, Maharashtra under Section 35A of the Banking Regulation Act, 1949 read with Section 56, effective from close of business on July 1, 2015 for six months. The Directions prohibited the bank from granting or renewing loans and advances, making investments, incurring liabilities including fresh deposits and borrowings, disbursing payments except as allowed, entering into compromises or arrangements, and disposing of assets except as notified by RBI. Deposit withdrawals were restricted to ₹1,000 per account on one occasion during the Directions period beginning July 2, 2015. RBI clarified that the order was not a cancellation of licence and that the bank would continue operations with restrictions, subject to possible modification later.
Why RBI Acted
The Reserve Bank issued Directions under Section 35A of the Banking Regulation Act, 1949 read with Section 56 to Shri Sai Urban Cooperative Bank Ltd. for six months, effective close of business on July 1, 2015. Under the Directions, the bank could not grant or renew loans and advances, make investments, incur liabilities including borrowings and acceptance of fresh deposits, disburse payments except as permitted, enter into compromises or arrangements, or sell/transfer/dispose of assets except as notified. Depositors were allowed to withdraw up to ₹1,000 from each savings/current/other deposit account on one occasion during the Directions period. RBI stated the order should not be construed as cancellation of the banking licence and that the bank would continue banking business with restrictions, with possible future modifications depending on circumstances.
Operating Impact
The bank must operate under RBI-imposed restrictions for six months, limiting lending, investment, borrowing, fresh deposit acceptance, and other asset/liability actions. Depositors are affected by a strict withdrawal cap of ₹1,000 per account on one occasion during the order period, while the bank remains open but constrained until RBI modifies the Directions or the period ends.
Regulatory Basis
- sub section (1) of Section 35A of the Banking Regulation Act, 1949 read with Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Business restriction
- Effective From
- 1 Jul 2015
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank