The Reserve Bank of India (RBI) has imposed stringent regulatory restrictions on Valsad Mahila Nagrik Sahakari Bank located in Valsad, Gujarat in view of the weakening financial condition of it. Under these instructions, bank customers will no longer be able to withdraw any amount from their accounts. These restrictions issued by RBI have been implemented in the form of ‘Directions’, which will remain in effect for the next six months from the close of business on Thursday.
Major restrictions imposed on banks
As per the instructions of the central bank, Valsad Mahila Nagrik Sahakari Bank will no longer be able to give any new loans nor renew existing loans without the prior permission of RBI. Will not be able to make any kind of investment. Will not be able to take any new liability. Will not be able to sell or transfer any of his property.
Along with this, keeping in mind the current cash position (liquidity) of the bank, RBI has instructed it not to allow customers to withdraw money from savings, current or any other account. However, the bank has been given the freedom to set-off the loan against the deposited amount.
Why did RBI take this step?
According to RBI, recent developments had raised serious supervisory concerns about the bank and it became necessary to take this step to protect the interests of depositors. The central bank also clarified that it had earlier tried to improve the functioning of the bank in collaboration with its board and senior management, but due to lack of adequate and concrete corrective steps, strict action had to be taken.
What relief will the depositors get?
The central bank has assured that eligible depositors will get the insurance benefit of deposits up to a maximum of ₹ 5 lakh per depositor under DICGC i.e. Deposit Insurance and Credit Guarantee Corporation. The Central Bank has clarified that these instructions do not mean cancellation of the bank’s license. The Bank will continue limited banking services under the conditions and restrictions prescribed by the RBI until its financial position improves. RBI said that it is continuously monitoring the situation of the bank and will take necessary steps or amend the instructions from time to time keeping in mind the interests of the depositors.
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