Deccan Urban Co-op Bank withdrawals capped at Rs 1000 per customer; RBI bars from lending, investing

The Reserve Bank of India (RBI) on Friday imposed a Rs 1,000 cap on withdrawals from all savings, current or any other accounts of Deccan Urban Cooperative Bank. The restrictions shall stay in force for a period of six months as RBI looks to improve the bank’s liquidity position, the central bank said in a statement late Friday. The curbs come into force from the close of business on Friday, February 19, 2021. The withdrawal limit imposed on the bank is similar to that imposed on PMC Bank, Lakshmi Vilas Bank, and Mantha Urban Cooperative Bank in the past.

Deccan Urban Co-operative Bank, a Karnataka-based lender, has also been barred from granting or renewing any loans and advances. It has also been barred from making any investment; incurring any liability including borrowal of funds and acceptance of fresh deposits; disbursing or agreeing to disburse any payment, whether in the discharge of its liabilities and obligations, or otherwise.

The move will also restrict Deccan Urban Co-operative Bank’s ability to enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except as notified in the RBI in its direction sent to the bank.

Although the withdrawal limit has been capped to just Rs 1,000 per account, RBI has said that depositors will be allowed to set off loans against deposits subject to some conditions. “The issue of the above Directions by the RBI should not per se be construed as a cancellation of the banking license by RBI. The bank will continue to undertake banking business with restrictions till its financial position improves,” the Reserve Bank of India said.

RBI had earlier in November last year imposed a penalty of Rs 1 lakh on Deccan Urban Co-operative Bank, for contravention of the directions issued by it on the prohibition of loans and advances to directors. The central bank has earlier placed similar restrictions on banks such as Yes Bank where the withdrawal limit was capped to Rs 50,000. Similarly, PMC Bank’s withdrawal limit was also capped to Rs 50,000 but was later revised t0 Rs 1 lakh. Lakshmi Vilas Bank was the latest in the line where the withdrawal limit was capped at Rs 25,000 per account.