On Tuesday, the Reserve Bank of India (RBI) imposed operational restrictions on Punjab and Maharashtra Co-operative Bank (PMC Bank). Withdrawals per bank account were restricted to Rs 1,000 causing chaos outside its branches in Mumbai.

"According to the Directions, depositors will be allowed to withdraw a sum not exceeding Rs 1,000 of the total balance in every savings bank account or current account or any other deposit account by whatever name called, subject to conditions stipulated in the RBI Directions," the RBI said.

PMC Bank was also instructed to not grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and accept fresh deposits, disburse or agree to disburse any payment whether in the discharge of its liabilities and obligations, without prior approval in writing from the central bank.

However, RBI said that these directions issued should not be construed as a cancellation of banking licence. PMC Bank will continue to undertake banking business with restrictions till further notice/instructions from RBI.

The restrictions will remain in force for 6 months starting 23 September.

While reasons for these restrictions were not specified, they are generally made by the RBI when there are concerns regarding the financial health of the institution.

The urban co-operative bank runs operations in the states of Maharashtra, Goa, Gujarat, Andhra Pradesh and Madhya Pradesh.