Recorded RBI impact
License suspension
License suspension · Fresh imposition
Published by RBI
2 Sept 2006
Case Brief
The Central Government, on an application by the Reserve Bank of India, placed United Western Bank Ltd. under moratorium effective from 2 September 2006 at 14:00 hrs. up to and inclusive of 1 December 2006, or earlier if alternate arrangements were made. The order was issued in public interest, in the interest of depositors and the banking system. During the moratorium, the bank could make only specified payments, and depositors were allowed to withdraw up to Rs. 10,000 in total from their savings, current, or other deposit accounts through branches. ATM withdrawals through the bank's own ATMs and shared ATMs were temporarily disallowed to enforce the ceiling. RBI cited the bank's negative CRAR, losses, and inability to produce a credible capital-raising plan as factors that jeopardised depositor interests, and said it would examine options including amalgamation.
Why RBI Acted
On RBI's application, the Central Government issued an order of moratorium against United Western Bank Ltd. The order was passed in public interest, in the interest of depositors and the banking system. RBI noted that the bank's assessed Capital to Risk Weighted Asset Ratio had turned negative at (-) 0.3% as on June 30, 2006, that depositors' interests had been jeopardised, and that the bank was unable to present a credible plan to raise fresh capital to restore its CRAR to the prescribed level. During the moratorium, only specified payments were permitted and depositor withdrawals were capped at Rs. 10,000 per account through bank branches; ATM withdrawals were blocked to enforce the ceiling. RBI also stated it would consider amalgamation or other alternatives during the moratorium period.
Operating Impact
The bank had to operate under strict moratorium conditions for the stated period, with depositor withdrawals capped at Rs. 10,000 and ATM access disabled for cash withdrawals. Depositors were directly affected, while RBI and the government considered longer-term resolution options such as amalgamation. The restrictions were effective from 14:00 hrs on 2 September 2006 unless lifted earlier by alternate arrangements.
Action Facts
- Primary Impact
- License suspension
- Effective From
- 2 Sept 2006
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Bank