The Reserve Bank of India (RBI) has imposed severe restrictions on three cooperative banks, Innovative Cooperative Urban Bank Ltd. (Delhi), Industrial Cooperative Bank Ltd. (Guwahati), and Bhavani Sahakari Bank Ltd. (Mumbai), under Section 35A read with Section 56 of the Banking Regulation Act, 1949.
Effective from the close of business on July 4, 2025, the RBI directives bar these banks from issuing fresh loans, accepting new deposits, investing funds, or incurring any liabilities without prior RBI approval. The move comes in the wake of the banks’ failure to address serious supervisory concerns, despite earlier engagements with the central bank.
The most stringent action is against Bhavani Sahakari Bank, which has been prohibited from allowing any withdrawals from customer accounts. On the other hand, Innovative Cooperative Urban Bank and Industrial Cooperative Bank have been allowed limited withdrawals, capped at Rs 35,000 per depositor.
All three banks are permitted to incur only essential expenses like staff salaries, rent, and electricity bills. Set-off of loans against deposits is allowed under certain conditions.
The RBI clarified that these actions do not amount to cancellation of banking licenses, and the banks will continue to function under restrictions for six months, subject to review.
Depositors are eligible to receive up to Rs 5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC) cover. More details are available at www.dicgc.org.in.
