Recorded RBI impact
Business restriction
Business restriction · Fresh imposition
Published by RBI
13 Nov 2003
Case Brief
The Reserve Bank of India flagged the performance and financial position of South Gujarat Local Area Bank Ltd., Navsari, Gujarat, as a regulatory and supervisory concern. Acting on RBI’s recommendation, the Government of India issued an Order of Moratorium under Section 45(2) of the Banking Regulation Act, 1949. The moratorium runs from the close of business on November 13, 2003 up to and inclusive of February 12, 2004. During this period, the bank is allowed to make only those payments specifically permitted under the moratorium order. The action was taken in the public interest and in the interest of depositors and the banking system.
Why RBI Acted
On RBI’s recommendation, the Government of India imposed an Order of Moratorium under Section 45(2) of the Banking Regulation Act, 1949, on South Gujarat Local Area Bank Ltd., Navsari, Gujarat. The release states that the bank’s performance and financial position were a matter of regulatory and supervisory concern. During the moratorium, the bank may make only those payments specifically permitted in the moratorium order. The order was passed in the public interest, in the interest of depositors and the banking system.
Operating Impact
The bank’s normal operating freedom is curtailed for the moratorium period, with payments allowed only to the extent specified in the order. Depositors and counterparties are directly affected by the temporary restriction on withdrawals and other payments. The restriction remains in force through February 12, 2004 unless otherwise modified or lifted.
Regulatory Basis
- Section 45(2) of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Business restriction
- Order Date
- 13 Nov 2003
- Effective From
- 13 Nov 2003
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Bank