PUDUCHERRY: The Reserve Bank of India (RBI) has imposed a cap on withdrawals at Rs 5,000 per customer at the Puducherry Co-operative Urban Bank Limited, apart from other restrictions, citing the bank’s liquidity position and failure to address supervisory concerns. The restrictions will remain in force for six months, subject to review.
According to a press statement issued by RBI chief general manager Brij Raj on Wednesday, the directions issued under Section 35A read with Section 56 of the Banking Regulation Act, 1949, came into effect on October 21.
Speaking to TNIE, a senior bank official said the management had met RBI officials in Chennai on Thursday, following discussions in Puducherry on Wednesday, on the instructions of Chief Minister N Rangasamy. “RBI officials assured us that the restrictions could be lifted if we obtain share capital from the government. We are in the process of securing the funds from the Puducherry government,” the official said.
He added that the bank had been facing problems for nearly a decade because cooperative societies and third parties failed to repay loans taken from the bank.
Puducherry Co-operative Urban Bank has six branches in Puducherry and nearly 25,000 members, including around 600 fixed deposit holders. Available financial records show that the bank’s deposits declined from Rs 163.89 crore in 2018-19 to Rs 131.91 crore in 2022-23. “Nearly Rs 14 crore is outstanding as bad debt. RBI took this decision to prevent further erosion of deposits. We will resolve the issue soon, and the bank will function as usual. Members need not panic,” the official said.
The RBI said it had held discussions with the bank’s board and senior management in recent months to improve its functioning. However, the bank had failed to take concrete steps to address supervisory concerns and protect depositors’ interests, necessitating the restrictions.
Depositors can withdraw up to Rs 5,000 from their savings, current or other accounts. The bank has also been permitted to set off loans against deposits, subject to conditions specified by RBI. Eligible depositors will be entitled to deposit insurance of up to Rs 5 lakh. Claims will be processed after depositors submit their willingness and their details are verified. Depositors can contact bank officials or visit www.dicgc.org.in for further information.
RBI clarified that the restrictions do not amount to cancellation of the banking licence. Under the directions, the bank cannot grant or renew loans and advances, make investments, incur liabilities, borrow funds or accept fresh deposits without prior written approval from the RBI. It cannot disburse payments, enter into compromises or arrangements, or sell, transfer or dispose of its properties and assets, except as permitted under the directions.
The bank can, however, meet essential expenses, including employees’ salaries, rent and electricity bills, as specified in the directions.