RBI Restricts Puducherry Co-Operative Urban Bank for 6 Months, Caps Withdrawals at ₹5,000

The Reserve Bank of India (RBI) has restricted the operations of Puducherry Co-operative Urban Bank, limiting withdrawals to ₹5,000 per depositor, as per news reports.  

The directions took effect after the close of business on October 21, 2026, following a deterioration in the bank’s financial position. The withdrawal limit applies to savings accounts, current accounts, and other accounts held by depositors.  

The bank can also set off loans against deposits, subject to the conditions specified by the RBI. 

Restrictions on Banking Operations 

The directions will remain in force for six months, subject to review by the central bank. During this period, the bank cannot grant fresh loans or advances, make investments, incur liabilities or transfer or dispose of its properties and assets. 

The RBI issued the directions under the relevant provisions of the Banking Regulation Act, 1949. It cited the bank’s current liquidity position as the reason for limiting withdrawals. 

RBI Raises Concerns Over Bank’s Response 

The central bank said it had engaged with the bank’s board and senior management in recent months to improve its functioning. However, the bank had not taken concrete steps to address the supervisory concerns raised by the regulator. 

The RBI said the lack of action, along with the need to protect depositors’ interests, had made the restrictions necessary. The directions will remain in place until the bank’s financial position improves, subject to any changes made by the central bank. 

Deposit Insurance Cover 

Eligible depositors can claim insurance of up to ₹5 lakh through the Deposit Insurance and Credit Guarantee Corporation (DICGC), subject to applicable conditions. 

The RBI clarified that the restrictions do not amount to cancellation of the bank’s banking licence. The bank can continue its banking business, provided it complies with the directions. 

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Conclusion 

The RBI said it will continue to monitor the bank’s financial position and take further action as required. The directions may be modified depending on the circumstances and the interests of depositors. 

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