The Reserve Bank of India imposed operational restrictions on Punjab and Maharashtra Co-operative Bank (PMC Bank).
The restriction will remain in force for a period of six months from the close of business of the bank on September 23.
Customers will not be allowed to withdraw more than Rs 10, 000 per account.
The bank will continue to undertake banking business with restrictions until further notice from the RBI.
The bank, which has 137 branches across the country, will not be able to grant or renew any loans.
The Mumbai-based bank cannot incur any liability including borrowal of funds and acceptance of fresh deposits.
It should not transfer or dispose of any of its properties or assets except as notified in the RBI directions.
A copy of the new RBI directive will be forwarded to each depositor and will displayed on bank's website.
The Reserve Bank said it may consider modifications of these directions depending upon circumstances.
As of March 2019, PMC Bank had deposits and advances of Rs 11,617 crore and Rs 8,383 crore, respectively.