Summary of this article
RBI caps Puducherry Co-operative Urban Bank withdrawals at Rs 5,000.
Restrictions on lending and fresh deposits apply for six months.
Eligible depositors can claim DICGC insurance cover up to Rs 5 lakh.
The Reserve Bank of India (RBI) has barred Puducherry Co-operative Urban Bank from offering fresh deposits, and has restricted customer withdrawals to Rs 5,000, citing concerns about the lender's financial health. The restrictions came into effet from October 21, 2026.
The instructions will be applicable for six months from the date of their issue, subject to review by the central bank. The Deposit Insurance and Credit Guarantee Corporation (DICGC) has announced that eligible depositors can avail deposit insurance of up to Rs 5 lakh with applicable conditions.
Withdrawal Limits And Banking Restrictions
Under the directions, customers cannot withdraw more than Rs 5,000 from their savings accounts, current accounts or other deposit accounts. The bank can also set off outstanding loans against deposits, subject to the conditions specified by RBI.
The lender cannot grant or renew loans and advances, make investments, accept fresh deposits or borrow funds without prior written approval from the central bank. Restrictions also cover payments, compromise arrangements and the sale, transfer or disposal of the bank’s properties and assets, except where permitted under the directions.
However, the bank can meet certain essential expenses, including employee salaries, rent and electricity bills, as specified in the RBI order.
RBI Cites Supervisory Concerns
RBI has been engaging with the bank’s board and senior management to address concerns about its functioning. However, the central bank found that the bank had not taken concrete steps to resolve its supervisory concerns and protect depositors’ interests.
The directions have been issued under Section 35A read with Section 56 of the Banking Regulation Act, 1949. These provisions empower RBI to issue directions to cooperative banks in specified circumstances.
The central bank is monitoring the lender’s financial position and may modify the restrictions depending on the circumstances and depositors’ interests. The directions will apply for six months from the close of business on October 21, 2026, subject to review.
Deposit Insurance Cover Of Up To Rs 5 Lakh
Eligible depositors can receive insurance of up to Rs 5 lakh from DICGC, subject to the applicable provisions of the DICGC Act, 1961. The coverage applies to deposits held in the same capacity and in the same right.
Depositors must submit their willingness to receive the claim, followed by the required verification. They can contact bank officials for details about the process. Further information is available on the DICGC website.
RBI has clarified that the directions do not automatically cancel the bank’s licence. Puducherry Co-operative Urban Bank can carry out banking activities permitted under the restrictions while the order is in force. The central bank may review the directions and make changes as warranted.
