The Reserve Bank of India (RBI) has imposed regulatory restrictions on Sri Mahatma Basaveshwar Co-operative Bank Ltd., Afzalpur, and The Tiruvalla Urban Co-operative Bank Ltd., Tiruvalla, Pathanamthitta, citing concerns over their liquidity position and inadequate corrective measures.
The directions, issued under Section 35A read with Section 56 of the Banking Regulation Act, 1949, will come into effect from the close of business on October 8, 2026, and remain in force for six months, subject to review.
Under the directions, both banks have been barred, without prior RBI approval, from granting or renewing loans, making investments, accepting fresh deposits, incurring liabilities, making payments or disposing of assets, except as specifically permitted.
Importantly, depositors will not be allowed to withdraw any amount from savings, current or other accounts. The banks may, however, set off loans against deposits subject to the conditions prescribed by RBI. Essential expenses such as employee salaries, rent and electricity bills may be incurred as permitted.
RBI said it had engaged with the boards and senior management of both banks over the past few years, but insufficient corrective action led to the directions.
Eligible depositors can claim deposit insurance of up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC), subject to applicable conditions and verification.
RBI clarified that the restrictions do not amount to cancellation of the banks’ licences.
