Recorded RBI impact
Business restriction
Business restriction · Fresh imposition
Published by RBI
12 Jun 2024
Case Brief
The Reserve Bank of India issued Directions to The Amanath Urban Co-operative Bank Ltd., Bangalore under Section 35A read with Section 56 of the Banking Regulation Act, 1949, effective from the close of business on June 12, 2024. The order restricts the bank from granting or renewing loans and advances, making investments, incurring liabilities including fresh borrowings and acceptance of fresh deposits, disbursing or agreeing to disburse payments, entering into compromises or arrangements, and selling or otherwise disposing of assets except as permitted in the RBI direction. Depositor withdrawals are capped at ₹60,000 across all accounts held by a depositor, subject to the stated conditions. RBI said the action was driven by material supervisory concerns, including poor financials, large accumulated losses, negative net worth for several years, and governance issues in the bank's One Time Settlement scheme. RBI clarified that the direction is not per se a cancellation of the banking licence and that the bank may continue banking business, including recovery of loans, within the imposed restrictions.
Why RBI Acted
RBI issued Directions under Section 35A read with Section 56 of the Banking Regulation Act, 1949 to The Amanath Urban Co-operative Bank Ltd., Bangalore, effective from close of business on June 12, 2024. The bank cannot, without prior written RBI approval, grant or renew loans and advances, make investments, incur liabilities including borrowings and acceptance of fresh deposits, disburse or agree to disburse payments, enter compromises or arrangements, or sell/transfer/dispose of assets except as permitted in the direction. Depositor withdrawals are restricted to a total of up to ₹60,000 across savings, current, or other accounts, subject to conditions. RBI said the directions were necessitated by material supervisory concerns including poor financials, accumulated losses, negative net worth for several years, and corporate governance concerns related to the bank's One Time Settlement scheme. RBI also noted that the directions do not per se mean cancellation of the banking licence.
Operating Impact
The bank must operate under RBI-imposed restrictions for six months from June 12, 2024, unless modified or reviewed earlier. Customers face withdrawal limits and constrained access to funds beyond the permitted cap, while the bank cannot freely expand lending, take fresh deposits, incur liabilities, or dispose of assets without RBI approval. Eligible depositors may receive DICGC insurance claims up to ₹5 lakh, subject to law and verification.
Regulatory Basis
- Section 35A read with Section 56 of the Banking Regulation Act, 1949
- Section 35A
- Section 56 of the Banking Regulation Act, 1949
- Deposit Insurance and Credit Guarantee Corporation Act, 1961
Action Facts
- Primary Impact
- Business restriction
- Order Date
- 12 Jun 2024
- Effective From
- 12 Jun 2024
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank