On Friday, the Reserve Bank of India announced that it will be barring the Karnataka-based Deccan Urban Co-operative Bank Ltd from granting any fresh loan or accepting deposits. Customers will not be able to withdraw more than ₹1,000 from their savings account for a period of six months.
The lender has also been asked not to make any fresh investments or incur any liability without taking its permission first.
On Thursday, February 18th, the RBI also said that it has issued directions to the Chief Executive Officer (CEO) of the bank.
It has also asked the lender to desist from disbursing any kind of payment, whether in the discharge of its liabilities or otherwise or to dispose of any of its assets except the ones that are notified in the RBI direction.
In a release on Friday, the RBI also said that considering the bank’s current liquidity position, a sum that is not exceeding ₹1000 only of the total balance across all current accounts or savings bank or any other account of a depositor, may be allowed to be withdrawn.
It further announced that the customers can also set off their loans against deposits that are subject to conditions. According to the regulator, 99.58 percent of the depositors are fully covered by the DICGC insurance scheme.
The Deposit Insurance and Credit Guarantee Corporation or the DICGC is a wholly-owned subsidiary of the Reserve Bank of India, is seen to provide insurance cover on bank deposits.
Furthermore, the RBI said that putting the bank under restrictions should not be construed as a cancellation of its banking license. The bank will continue to undertake any kind of banking business with restrictions till its financial position is seen to improve.
The Reserve Bank of India has also been considering the modifications of the directions depending upon circumstances. It also added that the directions are set to remain in action for six months from the close of business on February 19, 2021, and are subject to review.