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Now, RBI caps withdrawal limit at Rs 35000 for Bengaluru Co-operative bank, customers panic

RBI has issued certain directions to Sri Gururaghavendra Sahakara Bank Niyamitha (SGRSBN) bank, whereby, as from the close of business on January 10, 2020

New Delhi: The Reserve Bank of India has restricted cash withdrawal for the account holders of a bank in Bengaluru, Karnataka. RBI has issued certain directions to Sri Gururaghavendra Sahakara Bank Niyamitha (SGRSBN) bank, whereby, as from the close of business on January 10, 2020. The RBI will not be able to grant or renew any loans and advances, make any investment, incur any accountability, including borrowing of funds and acceptance of fresh deposits.

The RBI has also been stopped from spending any payment in the discharge of its accountabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets. Specifically, a sum not exceeding Rs 35,000 of the total balance in every savings bank or current account or any other deposit account will only be allowed to be withdrawn. The maximum cash withdrawal limit for SGRSBN banks stands at Rs 35,000.

The directions by the RBI should not be interpreted as a cancellation of a banking license by RBI. Reserve Bank of India will continue to undertake banking business with restrictions until its financial position improves. According to RBI, the directions shall remain in force for at least six months from the close of business of January 10, 2020, and are subject to analysis. Earlier, the RBI had issued written directions to the bank on January 2, 2020.

Sri Guru Raghavendra Sahakara Bank Niyamitha is an urban cooperative bank and the RBI has issued directions in the exercise of powers vested in it under subsection (1) of Section 35 A of the Banking Regulation Act, 1949, read with Section 56 of the Banking Regulation Act, 1949 (AACS). According to the RBI website, the rate of interest on deposits of ‘1 year to less than 2 years’ was 8 percent per annum and 8.5 percent per annum on deposits of ‘2 years up to 5 years’.

Earlier, the RBI had issued directions was considering the Punjab and Maharashtra Cooperative (PMC) Bank Limited, Mumbai, Maharashtra when the cash withdrawals were restricted for the bank account holders.

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