The Reserve Bank of India has imposed business restrictions on Nagar Sahakari Bank Ltd, Etawah, capping withdrawals at ₹50,000 per depositor and barring fresh lending effective immediately, according to rbi.org.in.
The central bank issued the directions under Section 35A of the Banking Regulation Act after finding the cooperative bank's financial position "highly adverse and unsustainable". RBI's order prohibits the bank from granting or renewing any loans or advances, making any investment, incurring any liability or agreeing to disburse any payment without prior approval. The restrictions will remain in force for six months from 24 January 2024, as stated in the central bank's release.
The move affects the Uttar Pradesh-based bank's 1.2 lakh depositors and comes amid RBI's intensified scrutiny of cooperative banks following a spate of failures. Similar restrictions were placed on Punjab & Maharashtra Cooperative Bank in 2019 and on 23 cooperative banks in 2023 alone. The cooperative banking sector, which manages ₹5.2 lakh crore in deposits across 1,500 banks, has seen 64 banks face regulatory action since 2020, according to banking ministry data.
RBI has directed the bank to submit a comprehensive revival plan within 30 days. The central bank will review the restrictions after six months based on the bank's compliance and financial restructuring progress. Depositors can approach the Deposit Insurance and Credit Guarantee Corporation for claims up to ₹5 lakh per account if the bank fails to meet its obligations, according to the regulatory order.