RBI imposes restrictions on Musiri Urban Co-operative Bank; caps withdrawal at Rs 5,000 per customer

The Reserve Bank of India on Friday imposed a Rs 5,000 cap on withdrawals by individual customers from Tamil Nadu-based Musiri Urban Co-operative Bank as part of several restrictions slapped on the lender due to its deteriorating financial condition.

The restrictions on the lender will remain in force for six months from the close of business on March 3 and are subject to review, the RBI said in a statement.

With curbs in place, the cooperative bank, without approval of the RBI, cannot grant loans, make any investment, and disburse any payment. The lender cannot also dispose of any of its properties, among others.

"In particular, a sum not exceeding Rs 5,000 of the total balance across all savings bank or current accounts or any other account of a depositor, may be allowed to be withdrawn...," the RBI said.

Further, it said that eligible depositors would be entitled to receive deposit insurance claim amount of his/her deposits up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation.

The RBI, however, said the directions should not per se be construed as cancellation of the banking licence.

"The bank will continue to undertake banking business with restrictions till its financial position improves," it said, adding that it may consider modifications of the directions depending upon circumstances.