RBI issues directions to Mumbai's City Co-operative Bank, puts limit on withdrawal

The Reserve Bank of India (RBI) has restricted the City Co-operative Bank, Mumbai, from issuing or renewing loans, liability, or accepting fresh deposits. The directions, issued under Section 35A of the Banking Regulation Act, 1949 (applicable to co-operative societies) and Section 56 of the Banking Regulation Act, 1949, will be applicable from April 17. The central bank has indicated poor "financial position" as a reason for these directions, which it said may change in future.

The current directions by the central bank, however, do not in any way mean that the bank's licence has been cancelled, said the RBI.

According to the directions, depositors will be allowed to withdraw less than Rs 1,000 of the total balance held in every saving bank or current account or any other deposit account, subject to conditions stipulated in the RBI directions.

In case of any liability, the amount may be adjusted first to the relevant barrowal account, RBI said. The bank may also renew the existing term deposits on maturity, it said.

Under the order, without the prior approval from the RBI, the bank can't grant or renew any loans and advances or investment. The RBI statement said the bank can't anchor any liability, including borrowal of funds, and acceptance of fresh deposits. It also can't disburse any payment for liabilities or otherwise enter into any comprise or agreement and sell, transfer, or dispose of any assets without the central bank's written approval.  

The statement says the City Co-operative Bank would continue its banking business till there's an improvement in its financial position, and the Reserve Bank may consider modifications in them depending upon circumstances.