Recorded RBI impact
Business restriction
Business restriction · Fresh imposition
Published by RBI
8 Oct 2026
Case Brief
RBI issued fresh Directions to Sri Mahatma Basaveshwar Co-operative Bank Ltd., Afzalpur under Section 35A read with Section 56 of the Banking Regulation Act, 1949, effective from the close of business on October 08, 2026. The regulator said it had engaged with the bank's Board and senior management over the last few years, but the bank had failed to take concrete steps to address supervisory concerns and protect depositors, necessitating the Directions. The order prohibits the bank, without prior written RBI approval, from granting or renewing loans and advances, making investments, incurring liabilities including borrowings and acceptance of fresh deposits, making payments, or selling/transferring assets, and it also prevents withdrawals from savings, current, and other depositor accounts, subject to limited exceptions such as set-off of loans against deposits and essential expenses. RBI clarified that the order is not a licence cancellation and that the bank may continue banking business only within the stated restrictions 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 Sri Mahatma Basaveshwar Co-operative Bank Ltd., Afzalpur because the bank had not taken concrete steps to address supervisory concerns and safeguard depositors. The Directions restrict the bank from granting or renewing loans and advances, making investments, incurring liabilities including borrowings and fresh deposits, disbursing payments, entering compromises/arrangements, and selling or disposing of assets without prior RBI approval; they also prohibit withdrawals from savings, current, and other depositor accounts, subject to limited set-off and essential expenditure permissions. RBI stated the bank would continue operating subject to these restrictions and that the directions are not a cancellation of licence.
Operating Impact
The bank must operate under tight RBI-imposed controls from October 08, 2026 for six months unless modified earlier. Depositors cannot freely withdraw funds, and the bank cannot expand lending, raise fresh deposits, incur new liabilities, or dispose of assets without approval; only limited essential spending and certain set-offs are permitted.
Regulatory Basis
- Section 35A read with Section 56 of the Banking Regulation Act, 1949
- Section 35 A read with Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Business restriction
- Order Date
- 7 Oct 2026
- Effective From
- 8 Oct 2026
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank