Konark Urban Co-op Bank: RBI restricts customer account withdrawals

Konark Urban Co-op Bank customers cannot withdraw money from any type of account, whether it's a savings, current, or any other account

The Reserve Bank of India (RBI) on Tuesday imposed several restrictions, including on withdrawals, on The Konark Urban Co-operative Bank, Ulhasnagar (Maharashtra), due to the bank's deteriorating financial situation.

The restrictions in the form of Directions under Section 35A of the Banking Regulation Act, 1949, on The Konark Urban Co-operative Bank came into effect from the close of business on April 23.

What are the restrictions?

The bank cannot grant or renew any loans and advances, make any investment, incur any liability, transfer, or otherwise dispose of any of its properties without permission from the RBI.

The RBI further stated that restrictions on the lender should not per se be construed as cancellation of the banking license.

The bank, it added, will continue to undertake banking business with restrictions until its financial position improves.

What do the restrictions mean for bank customers?

"Considering the bank's present liquidity position, no amount from the total balance across all savings bank or current accounts or any other account of a depositor may be allowed to be withdrawn, but are allowed to set off loans," the RBI said.

This means that due to the current financial situation of the bank, no one can withdraw money from any type of account, whether it's a savings, current, or any other account.

However, people are allowed to use the money in their accounts to pay off loans they have with the bank, but they must follow specific rules set by the RBI in doing so.

Eligible depositors will also be entitled to receive a deposit insurance claim amount of their deposits up to Rs 5 lakh only from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

Earlier this month, RBI imposed curbs on Maharashtra-based Shirpur Merchants' Co-operative Bank and Mumbai-based Sarvodaya Co-operative Bank.