RBI caps deposit withdrawal from ailing National Co-operative Bank at Rs 50,000

RBI imposes business restrictions on the National Co-op bank

The Reserve Bank of India (RBI) on July 24 imposed business restrictions on Bengaluru-based The National Co-operative Bank Ltd and capped deposit withdrawal at Rs 50,000 per account. The action, it is learned, was triggered by the weak financial position of the bank.

Subsequently, the bank is not allowed to issue fresh loans or accept fresh deposits without prior approval from the central bank, the RBI said in a statement.

Depositors will be entitled to receive deposit insurance claim amount up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation, the RBI said.

The imposition of business restrictions, however, does not amount to  cancellation of banking licence, the regulator mentioned. The bank will continue to undertake banking business with restrictions till its financial position improves, the RBI said.

The Reserve Bank may consider modifications of these directions depending upon circumstances. The business restrictions have been imposed for a period of six months from the close of business on July 24, 2023 and are subject to review, the RBI added.

In May, the RBI had imposed a monetary penalty on the National Co-operative bank citing certain rule violations.

The lender was collecting fixed penal charges for a shortfall in maintenance of minimum balance in saving bank accounts, instead of proportionate to the extent of shortfall, the RBI had said.

According to the last annual report available, The National Co-operative Bank had total deposits of Rs 1,679 crore and loans of Rs 1,128 crore as on March 31, 2021. Data is not available after that date. Also, the bank’s net non-performing assets, as on March 31, 2021, stood at 27.81 percent, while it had a capital adequacy ratio of 12.12 percent, according to the annual report. The bank has around 13 branches in different parts of Bengaluru.