Directions under Section 35 A read with section 56 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) – The Vaishali Shahari Vikas Co-operative Bank Ltd., Hajipur, Bihar

Case Brief

The Reserve Bank of India issued directions under Section 35A read with Section 56 of the Banking Regulation Act, 1949 against The Vaishali Shahari Vikas Co-operative Bank Ltd., Hajipur, Bihar. Effective from the close of business on June 14, 2023, the bank cannot, without prior written RBI approval, grant or renew loans and advances, make investments, incur liabilities including borrowings and fresh deposit acceptance, disburse payments, enter into compromises or arrangements, or sell/transfer/dispose of assets except as permitted in the directive. Because of the bank’s liquidity position, deposit withdrawals from savings, current, or other accounts are also frozen, subject to the stated set-off conditions. RBI clarified that this is not a cancellation of banking licence; the bank may continue operations under restrictions for six months from June 14, 2023, subject to review and possible modification.