In a significant decision, the Reserve Bank of India (RBI) has imposed limitations on Shree Mahalaxmi Urban Co-operative Credit Bank Ltd. in Gokak, effective from the end of business on September 27, 2024.
The bank is prohibited from granting or renewing loans, making investments, accepting new deposits, or incurring additional liabilities without prior RBI approval. Furthermore, the bank is not allowed to make any payments, and the sale or transfer of assets requires explicit authorization.
These actions are a response to the bank’s ongoing liquidity issues, with the RBI intervening to protect depositors’ interests. Account holders will be unable to withdraw funds from savings or current accounts, although loans can be settled against deposits under certain conditions. However, necessary expenditures, including salaries and utility bills, will still be permitted.
To enhance depositor protection, the RBI has confirmed that eligible customers will receive deposit insurance coverage up to Rs 5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC). It is anticipated that over 94 percent of depositors will have their full account balances protected by this insurance scheme.
The RBI has clarified that these restrictions do not equate to a revocation of the bank’s license. The institution will continue its operations with a focus on recovering loans while under close monitoring. These directives are set to remain in place for six months and will be reviewed based on future circumstances.
