Recorded RBI impact
Business restriction
Business restriction · Fresh imposition
Published by RBI
5 Mar 2013
Case Brief
RBI issued Directions under section 35A of the Banking Regulation Act, 1949 read with section 56 against Surat Nagrik Sahakari Bank Ltd., Surat, effective from the close of business on March 1, 2013. Under the order, depositors may withdraw only up to Rs 1,000 per account, subject to stated conditions, and the bank cannot grant or renew loans, make investments, incur liabilities, accept fresh deposits, disburse payments, enter compromises/arrangements, or dispose of assets without prior written RBI approval, except as specifically permitted in the Directions. RBI clarified that the action is not a cancellation of licence and that the bank may continue to conduct banking business with restrictions until its financial position improves.
Why RBI Acted
The Reserve Bank of India issued Directions under section 35A of the Banking Regulation Act, 1949 (as applicable to co-operative societies) read with section 56. The bank is restricted from granting or renewing loans and advances, making investments, incurring liabilities including borrowings and acceptance of fresh deposits, disbursing payments, entering into compromises/arrangements, or selling/transferring/disposal of assets without prior RBI approval, except as specifically notified. Depositors are permitted to withdraw only up to Rs 1,000 from each savings/current/other deposit account, subject to the conditions in the Directions. RBI clarified that the order is not a cancellation of banking licence and the bank may continue banking business with restrictions until its financial position improves.
Operating Impact
The bank must operate under RBI-imposed limits from March 1, 2013, including a per-account withdrawal cap of Rs 1,000 and prior approval requirements for core banking actions. Depositors are directly affected by the withdrawal ceiling, while the bank’s lending, funding, payment, and asset-disposal activities are constrained until RBI modifies the Directions.
Regulatory Basis
- sub-section(1) of section 35A of The Banking Regulation Act, 1949 (As applicable to Co-operative societies)
- Section 56 of The Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Business restriction
- Order Date
- 27 Feb 2013
- Effective From
- 1 Mar 2013
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank