Recorded RBI impact
Extension
Business restriction · Extension
Published by RBI
28 Oct 2014
Case Brief
The Reserve Bank of India extended by six months the directions already in force against The Panihati Co-operative Bank Ltd., Panihati, Kolkata, taking the effective period through 23 April 2015, subject to review. The order was originally issued on 24 April 2014 because of the bank’s very precarious financial position. The directions, issued under Section 35A of the Banking Regulation Act, 1949 read with Section 56, restrict the bank from undertaking several activities without prior written RBI approval, including lending, investments, incurring liabilities, accepting fresh deposits, making payments, and disposing of assets. Depositors are allowed to withdraw only up to Rs 1,000 per account, subject to conditions in the directions. The RBI also clarified that the order should not be construed as cancellation of the banking licence, and that the bank would continue to undertake banking business with restrictions until its financial position improves.
Why RBI Acted
The Reserve Bank extended for six months the directions first imposed on 24 April 2014, continuing them from 24 October 2014 until 23 April 2015, subject to review. The directions were issued under Section 35A of the Banking Regulation Act, 1949 read with Section 56 because of the bank’s very precarious financial position. Under the order, the bank cannot, without prior RBI approval, grant or renew loans and advances, make investments, incur liabilities including borrowings and acceptance of fresh deposits, disburse payments, enter into compromises or arrangements, or sell/transfer/dispose of properties or assets, except as permitted. Depositors may withdraw only up to Rs 1,000 from each savings/current/other deposit account, subject to conditions.
Operating Impact
The bank must continue operating under tight RBI-imposed restrictions until 23 April 2015 or until modified. Borrowing, lending, fresh deposit acceptance, and asset disposals remain constrained, while depositors face a withdrawal cap of Rs 1,000 per account subject to conditions.
Regulatory Basis
- Section 35A of the Banking Regulation Act, 1949
- Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Extension
- Order Date
- 24 Oct 2014
- Effective From
- 24 Oct 2014
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank