The Reserve Bank of India (RBI) has recently imposed restrictions on 2 co-operative banks: Sarvodaya Co-operative Bank, Mumbai and National Urban Co-operative Bank Limited in Pratapgargh, Uttar Pradesh. The decision comes in the interest of Depositors amidst Banks’ financial distress.
Constraints on Sarvodaya Co-operative Bank
RBI has capped the withdrawals of INR 15,000 from the account of Sarvodaya Co-operative Bank due to its deteriorating financial health. With immediate effect, customers will be allowed to withdraw only INR 15,000 from their accounts. Additionally, the bank has been prohibited from granting or renewing the loan, making investments or incurring any liabilities without prior approval from RBI.
Also Read | Ashneer Grover Ventures into Fintech Again with ZeroPe: A Medical Loan App
Deposit Insurance Assurance
However, eligible depositors can claim up to INR 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) in case of any financial loss. DICGC provides deposit insurance to depositors of Indian banks. In the event of a bank failure, closure, or imposition of restrictions like the ones mentioned in the news feature, DICGC ensures that depositors are compensated up to a certain limit for their deposits.
Constraints on National Urban Co-operative Bank
Similarly, the RBI has capped the withdrawals at INR 10,000 for customers of National Urban Co-operative Bank Limited also in Pratapgarh, Uttar Pradesh. This decision comes in light of the Bank’s worsening financial condition.
Just like Sarvodaya Co-operative Bank, depositors of this bank are also eligible to claim up to INR 5 Lakh from DICGC. The bank is restricted from granting loans, making investments, or disbursing payments without RBI’s approval.
Also Read | IRDAI Expresses Reservations Over IndusInd International Holdings’ Bid for Reliance Capital Acquisition
What Should Customers Do?
Customers must keep them updated with the latest developments regarding the restrictions imposed on these banks. They can follow the official announcements of the RBI and respective banks. Additionally, they should assess their financial needs and plan withdrawals accordingly keeping in mind the limits imposed by the RBI.
