Executive Summary
The Reserve Bank of India (RBI) has exercised its powers under Section 35 A read with Section 56 of the Banking Regulation Act, 1949, to impose strict operational restrictions on three distinct cooperative banks across India. These directives come in response to the banks’ deteriorating financial liquidity and the management’s failure to address critical supervisory concerns.
Affected Financial Institutions
The regulatory actions, effective from the close of business on their respective dates, apply to the following institutions:
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1. Kanaka Pattana Sahakara Bank Niyamita
Location: Davangere, Karnataka | Effective Date: March 12, 2026 -
2. The U.P. Civil Secretariat Primary Cooperative Bank Limited
Location: Lucknow, Uttar Pradesh | Effective Date: March 11, 2026 -
3. The Gujarat Rajya Karmachari Co-op. Bank Ltd.
Location: Ahmedabad, Gujarat | Effective Date: March 11, 2026
Key Restrictions Imposed
Without prior written approval from the RBI, none of the above-mentioned banks are permitted to undertake the following activities:
- Withdrawal Freeze: Complete prohibition on the withdrawal of any amount from savings banks, current accounts, or any other deposit accounts.
- Lending: Granting or renewing any loans and advances.
- Investments & Liabilities: Making new investments or incurring any fresh liabilities, including the borrowing of funds and acceptance of new deposits.
- Asset Management: Selling, transferring, or otherwise disposing of any properties or assets.
- Payments: Disbursing any payments in discharge of liabilities or obligations.
Exemptions and Allowed Operations
- Banks are allowed to set off loans against deposits, subject to conditions specified in the RBI directives.
- Banks may incur expenditure for essential operational items such as employee salaries, rent, and electricity bills.
Rationale Behind RBI’s Decision
The RBI had previously engaged with the Board and Senior Management of these institutions to facilitate operational improvements. However, a lack of concrete efforts by the banks to resolve supervisory concerns and protect depositor interests necessitated the immediate issuance of these binding directives.
Critical Information for Depositors (DICGC Coverage)
Eligible depositors of all three banks are protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961.
- Depositors are entitled to claim an insurance amount up to a monetary ceiling of ₹5,00,000/- (Rupees Five Lakh only) per depositor.
- Claims will be processed based on the submission of willingness by the concerned depositors and after due verification.
- For more information, depositors are advised to contact bank officials or visit the official DICGC website: www.dicgc.org.in.
Status of Banking Licenses & Future Outlook
The RBI has clarified that these directions should not be construed as a cancellation of banking licenses. The banks will continue to undertake banking business with the specified restrictions until their financial positions improve.
These directions will remain in force for a period of six months from their respective dates of implementation and are subject to continuous review by the Reserve Bank of India.