RBI issues Directions to Hardoi Urban Co-operative Bank Ltd., Hardoi (U.P.)

Case Brief

The Reserve Bank of India issued directions to Hardoi Urban Co-operative Bank Ltd., Hardoi under Section 35A of the Banking Regulation Act, 1949 read with Section 56, effective from the close of business on July 29, 2016. Under these directions, the bank could not grant or renew loans, make investments, incur liabilities including borrowings and fresh deposits, disburse payments, or dispose of assets except with prior RBI approval and within the limited carve-outs stated in the order. Depositors were allowed to withdraw only up to ₹1,000 from each savings, current or other deposit account, subject to adjustment against any outstanding borrowal liability; renewal of existing term deposits in the same name and capacity and certain permitted expenditures were allowed, as was investment in Government/SLR-approved securities. RBI clarified that the directions were not, by themselves, a cancellation of the bank’s licence and that the bank would continue to undertake banking business with restrictions for six months, subject to review.