Recorded RBI impact
Extension
Business restriction · Extension
Published by RBI
9 May 2014
Case Brief
RBI issued directions under Section 35A of the Banking Regulation Act, 1949 read with Section 56 to The Suri Friends Union Co-operative Bank Ltd., Birbhum, West Bengal. The directions, effective from the close of business on April 7, 2014, restrict the bank from granting or renewing loans and advances, making investments, incurring liabilities including borrowing and acceptance of fresh deposits, disbursing payments, entering into compromises or arrangements, and disposing of assets without prior RBI approval, except as covered by the earlier March 28, 2014 directions. Depositors can withdraw only up to Rs 1,000 from each savings/current/other deposit account, subject to conditions. RBI also clarified that the directions do not amount to cancellation of the banking licence and that the bank may continue business with restrictions until its financial position improves.
Why RBI Acted
Under Section 35A of the Banking Regulation Act, 1949 read with Section 56, RBI issued directions to The Suri Friends Union Co-operative Bank Ltd., Birbhum, West Bengal. From the close of business on April 7, 2014, the bank could not, without prior written approval of RBI, grant or renew loans and advances, make investments, incur liabilities including borrowings and acceptance of fresh deposits, disburse or agree to disburse payments, enter into compromises or arrangements, or sell/transfer/dispose of property or assets, except as notified in the earlier RBI directions dated March 28, 2014. Withdrawals were restricted so that no more than Rs 1,000 could be withdrawn from each savings/current/other deposit account, subject to the stipulated conditions. The release states the bank is not being licence-cancelled and may continue banking business with restrictions until its financial position improves.
Operating Impact
The bank must operate under RBI-imposed conditions and cannot freely expand lending, raise deposits, or make payments without approval. Depositors are affected by the withdrawal cap, while the bank’s normal business is constrained until RBI modifies the directions.
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
- 28 Mar 2014
- Effective From
- 7 Apr 2014
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank