In a significant move, the Reserve Bank of India (RBI) has imposed restrictions on Shree Mahalaxmi Urban Co-operative Credit Bank Ltd., Gokak, effective from the close of business on September 27, 2024.
The bank has been barred from granting or renewing loans, making investments, accepting fresh deposits, or incurring new liabilities without prior approval from the RBI. Additionally, no payments can be disbursed, and the sale or transfer of assets is prohibited without explicit authorization.
These measures are a response to the bank’s current liquidity challenges, with the RBI stepping in to safeguard the interests of depositors. Account holders will not be able to withdraw funds from savings or current accounts, though loans can be offset against deposits under specified conditions. Essential expenditures, including employee salaries and utility bills, will still be allowed.
To further protect depositors, the RBI has ensured that eligible customers will receive deposit insurance of up to Rs 5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC). Over 94 percent of depositors are expected to have full coverage of their account balances through this insurance scheme.
The RBI clarified that these restrictions do not amount to a cancellation of the bank’s license. The bank will continue to operate, focusing on loan recovery while under close supervision. These directives will remain in effect for six months, subject to review based on future developments.