RBI Actions on Baghat Urban Co-Operative Bank: Taking regulatory action, the Reserve Bank of India (RBI) has imposed strict restrictions on The Baghat Urban Co-operative Bank Limited, based in Solan, Himachal Pradesh. According to the instructions of the Central Bank, now this bank will neither be able to accept any new deposits nor will be able to issue new loans. Along with this, payment of bank liabilities has also been banned.

What are the instructions of RBI?

RBI said that without prior written permission the bank cannot give any new loan, accept new deposits nor fulfill its financial obligations. This step has been taken after serious financial irregularities came to light during the recent inspection.

According to the report of news agency PTI, considering the current cash position of the bank, RBI has set the withdrawal limit of customers at Rs 10,000. However, RBI has given the relaxation that the bank can use the amount present in the customers’ accounts to adjust their outstanding loans.

What will happen to insurance coverage?

RBI also clarified that the bank’s depositors have insurance protection under the Deposit Insurance and Credit Guarantee Corporation (DICGC). According to this provision, each depositor will get an insured amount up to a maximum of ₹ 5 lakh, which will be decided as per the status and rights of his account.

The central bank also clarified that these restrictions do not amount to canceling the bank’s license. The bank will be able to continue its operations with limited conditions. This step of RBI has been taken with the aim of stabilizing the financial condition of the bank and protecting the interests of depositors.

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Reserve Bank of India: Taking strict action against The Baghat Urban Co-operative Bank, a bank based in Solan, Himachal Pradesh, the Reserve Bank of India (RBI) has increased the withdrawal limit per customer to Rs 10,000. That means depositors will be able to withdraw a maximum of Rs 10,000 at a time from their savings, current or any other account in the bank. The Reserve Bank has taken this step in view of the current cash position of the bank.

What kind of restrictions were imposed on the bank?

Given the lack of efforts on the part of the bank to address supervisory concerns and protect the interests of depositors, the Reserve Bank had to intervene in the matter. RBI has imposed further restrictions on the bank, under which the bank can neither give loan nor give any advance without the written permission of the Reserve Bank, the bank cannot also undertake any liability such as lending or taking new deposits.

Depositors will be able to claim insurance

RBI said, “In view of the current cash position of the bank, the bank has been directed to allow withdrawal of a maximum of Rs 10,000 out of the total balance deposited in the savings bank or current account or any other account of the depositor. However, the bank reserves the right to adjust the deposits of the customers against their loan.”

Eligible depositors can claim insurance on their deposits up to a maximum of Rs 5 lakh from Deposit Insurance and Credit Guarantee Cooperation (DICGC). However, RBI has also clearly stated that the issuance of these instructions should not be interpreted as cancellation of banking license by RBI. Until the financial condition of the bank improves, the bank will continue its operations under these restrictions.

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