The Reserve Bank of India (RBI) has banned Sri Guru Raghavendra Cooperative Bank in Bengaluru from doing business from January 10, 2020, for next six months. This means the bank can no longer approve or grant any loan, cannot accept any fresh cash deposits and cannot allow any kind of new investment with the bank.
The RBI has also imposed a restriction on cash withdrawals for the customers. As per the RBI directive, account holders can only withdraw up to Rs. 35,000 from their account for the next six months.
While notifying the order for Sri Guru Raghavendra Cooperative Bank, the RBI said, “It is hereby notified for information of the public that in exercise of powers vested in it under sub section (1) of Section 35 A of the Banking Regulation Act, 1949 read with Section 56 of the Banking Regulation Act, 1949 (AACS), the Reserve Bank of India has issued certain Directions to Sri Gururaghavendra Sahakara Bank Niyamitha, Bengaluru, Karnataka whereby, as from the close of business on January 10, 2020, the aforesaid bank shall not, without prior approval of RBI in writing grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except as notified in the RBI Directions dated January 2, 2020, a copy of which is displayed on the bank’s premises for perusal by interested members of the public.”
On withdrawals, the RBI order said, “a sum not exceeding ₹35,000/- (Rupees thirty five thousand only) of the total balance in every savings bank or current account or any other deposit account may be allowed to be withdrawn subject to conditions stated in the above RBI Directions.”
The central bank further added that the order of the RBI should not per se be construed as cancellation of banking license by RBI. The bank will continue to undertake banking business with restrictions till its financial position improves. The Reserve Bank may consider modifications of these Directions depending upon circumstances.
The Sri Guru Raghavendra Cooperative Bank crisis comes in the wake of Punjab and Maharashtra Co-operative Bank Limited (PMC Bank) crisis. The RBI in September last year had imposed restrictions on cash withdrawals from the PMC Bank after the discovery of a Rs. 6,500 crore fraud.
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