Directions under Section 35A of the Banking Regulation Act, 1949 (AACS) –The Merchants’ Co-operative Bank Ltd., Dist. Dhule

Case Brief

RBI issued directions to The Merchants Co-operative Bank Ltd., Dist. Dhule under Section 35A of the Banking Regulation Act, 1949 (as applicable to co-operative societies) read with Section 56. The order, effective from the close of business on December 13, 2012, restricted the bank from granting or renewing loans and advances, making investments, incurring liabilities including borrowings and fresh deposits, making payments, entering compromises or arrangements, and selling or transferring assets except as specifically allowed. It also capped withdrawals from deposit accounts at Rs. 1,000 subject to the stipulated conditions. RBI stated that this was not a cancellation of licence and that the bank would continue operating with restrictions until its financial position improved, with the possibility of modification depending on circumstances.