The Reserve Bank of India (RBI) has imposed strict regulatory restrictions on Valsad Mahila Nagrik Sahakari Bank located in Valsad, Gujarat due to its deteriorating financial condition. Under these instructions, bank customers will no longer be able to withdraw any amount from their accounts. These restrictions, issued in the form of ‘directives’ by the RBI, came into effect after the close of business on Thursday and will remain in place for the next six months.
Main restrictions on the bank:
As per the instructions of the Central Bank, Valsad Mahila Nagrik Sahakari Bank will not be able to give any new loan or renew the existing loan without prior permission of RBI. It is also barred from making any investments, taking on any new liabilities, or selling or transferring any of its assets.
Further, in view of the current liquidity position of the bank, RBI has directed the bank not to allow withdrawals from savings, current, or any other accounts. However, the bank is permitted to set-off the loan against deposits.
Why did RBI take this step?
According to the RBI, recent developments had raised serious supervisory concerns about the bank, and the move was necessary to protect the interests of depositors. The Central Bank also clarified that it had previously worked with the bank’s board and senior management to improve its functioning, but the lack of adequate and concrete corrective measures led it to take this strict action.
What relief will the depositors get?
The Central Bank has assured that eligible depositors will get deposit insurance benefit up to a maximum of ₹5 lakh per depositor under DICGC (Deposit Insurance and Credit Guarantee Corporation). The Central Bank clarified that these instructions do not mean cancellation of the bank’s license. The Bank will continue to offer limited banking services under the terms and conditions 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 change the instructions from time to time keeping in mind the interests of the depositors.
