The Reserve Bank of India (RBI) has once again tightened its grip on cooperative banks. This time, the central bank has imposed several restrictions on The Baghat Urban Cooperative Bank, located in Solan, Himachal Pradesh. Customers of this bank will now be limited to withdrawing a maximum of ₹10,000 from their accounts.
RBI has said that several discussions were held with the board and management to improve the functioning of the bank but in view of the lack of satisfactory improvement and to protect the interests of the depositors, it became necessary to impose these restrictions.
Ban on new loans and deposits
Under the central bank’s directive, The Baghat Urban Co-operative Bank will no longer be able to grant new loans or accept new deposits without the RBI’s written permission. Given the bank’s liquidity position, depositors will be limited to withdrawing up to ₹10,000. However, the bank may adjust its customers’ deposits against their outstanding loans.
Guarantee up to Rs 5 lakh to depositors
The RBI stated that eligible depositors will be entitled to a maximum insurance cover of ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC). This amount will be inclusive of all deposits, including FDs, RDs, and savings accounts, irrespective of the amount deposited.
The bank’s license has not been cancelled yet.
The RBI clarified that these directives do not amount to cancellation of the bank’s license. The bank will continue to operate with limited activities until its financial position improves. The central bank stated that it will continuously monitor the situation and review these restrictions as necessary. These directives will take effect on October 8, 2025, and will initially remain in place for six months.
