The Reserve Bank of India said that the settlement in central bank money would reduce transaction costs.
The Reserve Bank of India (RBI) on November 23 extended the directions issued to Garha Co-operative Bank Ltd., Guna, Madhya Pradesh, for a period of three months from November 25, 2022 to February 24, 2023, subject to review.
It has been done in exercise of powers vested in it under sub-section (1) of Section 35 A read with Section 56 of the Banking Regulation Act, 1949 (AACS) from the close of business on February 24, 2021.
The validity of the directions was extended from time-to-time, the last being up to November 24, 2022.
“The Directions stipulate certain restrictions and / or ceiling on withdrawal / acceptance of deposits. The detailed Directions are displayed at the bank’s premises for interested members of public to peruse. Reserve Bank of India may consider modifications of the Directions depending upon the circumstances,” RBI said in a release.
The release added that the issue of Directions should not per se be construed as cancellation of banking license by the RBI. The bank will continue to undertake banking business with restrictions till its financial position improves.
In August, the central bank imposed monetary penalty on Garha Cooperative Bank for violating the compliance process.
The central bank on February 24, 2021, had issued directions such as the Administrator of the aforesaid bank shall not, without prior approval of RBI in writing grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, 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 Direction dated February 23, 2021 a copy of which is displayed on the bank’s premises for perusal by interested members of the public.
“Considering the bank’s present liquidity position, a sum not exceeding Rs 50000 (Rupees Fifty thousand only) of the total balance across all savings bank or current accounts or any other account of a depositor, may be allowed to be withdrawn, but bank is allowed to set off loans against deposits subject to the conditions stated in the above RBI Directions. In the bank, 99.40% of the depositors are fully covered by the DICGC insurance scheme,” RBI said in the release which laid down the directions.
Further, it added that the issue of the above Directions by the RBI should not per se be construed as cancellation of banking license by RBI. The bank will continue to undertake banking business with restrictions till its financial position improves. The Reserve Bank may consider modifications of these Directions depending upon circumstances.
Since then, the central bank has extended these direction for five time. It was first extended on August 24, 2021, then November 24, 2021, February 24, 2022, May 24, 2022, and August 23, 2022.