RBI extends action period on Indian Mercantile Co-operative Bank

Case Brief

RBI extended the Directions previously issued to Indian Mercantile Co-operative Bank Ltd., Lucknow for a further six months from December 12, 2014 to June 11, 2015, subject to review. The order was passed under Section 35A of the Banking Regulation Act, 1949 read with Section 56. Under these Directions, the bank cannot grant or renew loans and advances, make investments, incur liabilities including borrowings and acceptance of fresh deposits, disburse payments except as permitted, enter into compromises or arrangements, or sell/transfer/dispose of assets except as notified. Depositors may withdraw up to Rs 1,00,000 from an account during the directions period. The release states the bank will continue to undertake banking business with restrictions until its financial position improves and that the Directions should not be construed as cancellation of its banking licence.