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RBI imposes restrictions on Karad Coop Bank, withdrawals only once in six months

Tuesday, November 14, 2017
By Raju Vernekar

RBI has stated that that bank will also not be able to grant or renew any loans and advances, make any investments, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment and sell, transfer or otherwise dispose any of its properties or assets, without its approval

In view of its alleged unsatisfactory recovery of loans, the Reserve Bank of India (RBI) has imposed restrictions, including withdrawal by it's account holders, from Saving Bank, Current Account or any other deposit account on the Karad Janata Sahakari Bank Ltd ((KJSB), located at Karad, in Satara district.

Ajit Prasad, Assistant Adviser, RBI in a directive (No.DCBS.CO.BSD-I/D-4/12.22.126/2017-18 dated November 07, 2017), has advised the bank that its depositors will be allowed to withdraw only Rs. 1000, out of the total balance held in every saving bank or current account or any other deposit account.
Thus, depositors will be able to withdraw only Rs 1000 once in a 6 months. These directions has  become applicable from November 9 onwards.

RBI has stated that that bank, will also not be able to grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment( whether in discharge of its liabilities and obligations or otherwise), enter into any compromise or arrangement and sell, transfer or otherwise dispose any of its properties or assets, without its approval.

“The issue of the directions by the RBI, should not be construed as cancellation of banking licence and the bank will continue to undertake banking business with restrictions till its financial position improves. The RBI may consider modifications of these directions depending upon circumstances. The directions are imposed in exercise of powers vested in the RBI, under Sub-section (1) of Section 35 A of the Banking Regulation Act, 1949 read with Section 56 of the said Act," RBI directive stated.

It may be recalled that July 16, the RBI had imposed a penalty of Rs. 5 lakh on the bank for violating guidelines on shifting of branch without approval. The bank had violated RBI instructions by shifting its market yard branch, Sangli from 94/A, Market Yard, Sangli-416416 to Rajratna Heights, Miraj Sangli Service Road, Chandani Chowk Corner, Sangali-416416. This involved change in municipal ward number 35 to 50, for which no prior permission was obtained from RBI.

According to RBI guidelines, urban co-operative banks are required to take prior approval from it for shifting to a different locality or municipal ward. RBI had issued a show-cause notice to the bank. In response a bank had filed a written reply. However RBI found that it was not in consonance with its guidelines.

Speaking to The Afternoon D & C, Rajesh Patil, Chairman, KJSB said, “We are in the process of reducing our Non-Performing Assets (NPA) which are more than 17 percent permitted by RBI. We will soon hold an auction to sell our assets worth Rs. 70 crore. We have a share capital of Rs. 850 crore. Since foundation our bank’s business had grown exponentially and the projections for the next few years suggest that the expansion will continue. Our attempt will be to take corrective measures and take our bank from C to A category. Earlier too much leniency was shown in loan recovery."

However, the RBI restrictions have fixed its depositors in a fix since their money is locked up in the bank. The bank set up on October 22, 1962 has 29 branches and its area of operations includes Mumbai, Navi Mumbai, Satara, Sangli, Pune, Solapur and Kolhapur. It offers all type of loans, including home and education loans, on attractive interest rates, with minimum processing fee.

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