RBI Bans This Ahmedabad-Based Co-operative Bank From Issuing Loans And Accepting Fresh Deposits

The Reserve Bank of India (RBI) has issued directions to Ahmedabad-based Colour Merchants Co-operative Bank where it has asked the bank to stop granting or renewing any loans and advances, making any investment, incurring any liability including borrowing funds and accepting fresh deposits. This has come into effect from September 25, 2023. However, these directions do not mean cancellation of the licence and the bank will continue to undertake banking business.

In a statement, RBI said, "has issued certain Directions to Colour Merchants Co-operative Bank Ltd., Ahmedabad, whereby, as from the close of business on September 25, 2023, the bank shall not, without prior approval of RBI in writing grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets."

However, RBI allows depositors to withdraw a sum not exceeding Rs 50,000 from their total balance across all savings banks or current accounts.

Further, RBI directed that eligible depositors would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 lakh in the same capacity and the same right, from the Deposit Insurance and Credit Guarantee Corporation, under the provisions of Section 18A of the DICGC Act (amendment) 2021, based on submission of willingness by the concerned depositors.

The depositors may contact their bank officials for further information.

Also, RBI reiterated that "The issue of the above Directions by the RBI should not per se be construed as a cancellation of a banking license by RBI. The bank will continue to undertake banking business with restrictions till its financial position improves."

That means RBI may consider modifications of these Directions depending upon circumstances.

These Directions shall remain in force for six months from the close of business on September 25, 2023, and are subject to review.