Banking and Credit
The RBI, exercising powers under Section 35A read with Section 56 of the Banking Regulation Act, 1949, issued a directive on October 07 2026 that, effective from the close of business on October 08 2026, prohibits Sri Mahatma Basaveshwar Co‑operative Bank Ltd. from granting or renewing any loans and advances, making any investments, incurring any liability—including borrowing funds and accepting fresh deposits—disbursing or agreeing to disburse any payment, entering into any compromise or arrangement, and selling, transferring, or otherwise disposing of any of its properties or assets, except as specifically notified in the RBI Direction.
The bank is also barred from allowing withdrawals of any amount from savings, current, or any other depositor accounts. However, it may set off loans against deposits subject to the conditions stated in the RBI Directions. The bank may incur expenditure for essential items such as salaries of employees, rent, electricity bills, and similar necessities as specified in the Directions.
Financial Stability and Inclusion
The RBI noted that it has engaged with the bank’s Board and senior management over the past few years to improve its functioning, but insufficient concrete efforts prompted the issuance of these Directions to protect depositor interests. Eligible depositors are entitled to claim insurance coverage up to ₹5,00,000 (Rupees five lakh only) per depositor from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under the DICGC Act, 1961, upon submission of willingness and verification. Depositors may contact bank officials for further information, and details are also available on the DICGC website.
The RBI clarified that the issuance of these Directions should not be construed as a cancellation of the bank’s licence. The bank will continue to undertake banking business subject to the specified restrictions until its financial position improves. The RBI will continue to monitor the bank’s situation and may modify the Directions as warranted.
Regulatory and Policy Measures
These Directions will remain in force for a period of six months from the close of business on October 08 2026 and are subject to review. The press release reference for this action is 2026‑2027/1286, issued by the Chief General Manager, Brij Raj.
The RBI’s actions aim to safeguard depositor interests, maintain financial stability, and ensure that the bank’s operations are confined to essential activities while its liquidity position is addressed.