RBI imposes restrictions on Ahmedabad-based Colour Merchants Co-op Bank

The Reserve Bank has imposed several restrictions on Ahmedabad-based Colour Merchants Co-operative Bank, including capping withdrawal at Rs 50,000 per customer, in the wake of the deteriorating financial condition of the lender.

The restrictions, imposed in the form of 'directions', have come into effect with the close of business on September 25, 2023, the central bank said in a statement. The restrictions will remain in force for six months.

According to the directions, the bank without prior approval of the RBI cannot make any grant or renew loans, make any investment, incur any liability, and accept fresh deposits, among others.

"In particular, a sum not exceeding Rs 50,000 of the total balance across all savings bank or current accounts or any other account of a depositor, may be allowed to be withdrawn...," the RBI said.

It also said the eligible depositors would be entitled to receive deposit insurance claim amounts of his/her deposits up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

The depositors may contact their bank officials for further information, the RBI added.

It also said the issue of the directions should not per se be construed as a cancellation of a banking license by the RBI.

"The bank will continue to undertake banking business with restrictions till its financial position improves," it said.

The Reserve Bank also said that it may consider modifications of the directions depending upon circumstances.