Bengaluru, February 20, 2021: The Reserve Bank of India (RBI) announced on Friday that it has banned Deccan Urban Co-operative Bank Ltd, Karnataka, from offering new loans or accepting deposits. Also, customers cannot withdraw more than Rs 1000 from their savings account. The restriction has been imposed for six months.

The co-operative bank has also been prohibited from taking any new investment or new liability without prior approval. The RBI said it had given the directive to the bank’s chief executive officer (CEO) on Thursday (18 February). “Given the current cash position of the bank, depositors cannot be allowed to withdraw more than Rs 1000 from all savings accounts or current accounts,” the central bank said in a release.

According to RBI, customers can settle their debts on a deposit basis. It is dependent on certain conditions. However, the regulator said that 99.58 percent of depositors are under the Deposit Insurance and Credit Guarantee Corporation Insurance Corporation (DCGC) scheme. DCGC is a full-fledged subsidiary of RBI. It provides insurance on bank deposits.

RBI said that the bank’s ban should not mean that its bank license is being canceled. The bank will continue to do business as before until the financial situation improves. These instructions will be in effect for six months from the evening of 19 February 2021, depending on further review.

Earlier this month, the RBI had restricted money withdrawal from the Independence Co-operative Bank Limited in Nashik, Maharashtra. After the moratorium, RBI had said that 99.88 percent of the bank’s depositors are fully covered by the Deposit Insurance and Credit Guarantee Corporation Insurance Scheme. RBI had said that it would not be allowed to withdraw any amount from any account given the prevailing liquidity situation.