RBI extends restrictions over two Maharastra based cooperative banks

RBI: Following the expose of a major scam in Punjab and Maharashtra Cooperative Bank (PMC), the Reserve Bank of India has cracked the whip on cooperative banks. The Banking sector regulator extended the restrictions on two cooperative banks on Wednesday evening while it also imposed a penalty of Rs 3 crore on the SBM bank.

Exercising its powers under section 35A and section 56 of Banking Regulation Act of 1949, the RBI extended the restrictions on two cooperative banks on Wednesday evening.

The RBI has extended the restrictions Mumbai based the City Co-operative Bank Ltd for a period of six months. The bank was first placed under prohibitory orders in April 2017 which has been extended several times. The last direction was issued by the RBI on April 9, 2019 which was set to expire tomorrow (October 17, 2019) but the Central Bank decided to extend the restrictions period by another six months.

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“The aforesaid extension or modification by the Reserve Bank of India should not per-se be construed to imply that Reserve Bank of India is satisfied of substantive improvement in the financial position of the bank,” the RBI said in a statement.

Similarly, the Reserve Bank extended the restrictions on another Maharashtra based cooperative bank by a period of six months.

The RBI extended the restrictions on Vasantdada Nagari Sahakari Bank Ltd based in Osmanabad district of Maharashtra by another six months. The cooperative bank was under the restrictions since November 2017. However, unsatisfied with the situation of the bank, the RBI extended the restrictions by another three and a half months. Now the bank will be under the RBI directions till January 2020.

These directions are similar to the ones placed on the PMC Bank customers by the RBI. Last month, the RBI has capped the withdrawal and deposits in PMC bank accounts leading to a panic situation among the customers of the PMC Bank.A

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“The issue of directions should not per se be construed as cancellation of banking license by the Reserve Bank of India. The bank will continue to undertake banking business with restrictions till its financial position improves,” said the RBI in a statement.