The Reserve Bank of India (RBI) has imposed restrictions on the Deccan Urban Co-operative Bank of Karnataka (Karnataka) for conducting business. After this, the bank can no longer issue a new loan nor can it accept any deposit. The RBI has announced these restrictions because the financial condition of this bank is not correct. RBI said that ban on bank should not be taken to mean that his bank license is being canceled.
The financial condition of the bank is so bad that RBI has allowed all its savings and current account customers to withdraw only thousand rupees in 6 months. However, RBI has given conditional permission to customers to repay loans against deposits during the 6-month moratorium period. According to RBI, customers can settle the loan based on their deposits. This is subject to certain conditions.
According to RBI’s decision, any kind of business will be banned in this bank for immediate effect i.e. from 19 February 2021 for 6 months. The Reserve Bank has clarified that the ban does not in any way mean canceling the license of Deccan Urban Co-operative Bank. It can operate banking services with bank restrictions. At the same time, the bank will be reviewed again after the stipulated time period. However, despite the ban on functioning, 99.58% customers need not panic.
The RBI also said in its statement that customers will be given the benefit of insurance on deposits from ‘Deposit Insurance and Credit Guarantee Corporation’. Significantly, under this insurance, the customer gets an insurance cover of up to Rs 5 lakh on deposits.
RBI has also banned the bank from making any new investment or taking any new responsibility without its permission. Also, on 18 February, the bank’s CEO was directed not to make any kind of payment even if it is going to pay any liability. With this, the bank cannot also dispose of any asset exempted from RBI.