RBI Imposes Restrictions on Valsad Mahila Nagrik Sahakari Bank

The Reserve Bank of India (RBI) has issued directions to The Valsad Mahila Nagrik Sahakari Bank Ltd., Valsad, Gujarat, under Section 35A read with Section 56 of the Banking Regulation Act, 1949. The directive, dated December 17, 2025, came into effect from the close of business on December 18, 2025.

Under these restrictions, the bank cannot grant or renew loans, make investments, incur liabilities, or accept fresh deposits without prior RBI approval. The bank has also been barred from allowing withdrawals from any savings, current, or other accounts, except for specific conditions outlined in the RBI directions.

Scope Of Restrictions and Operational Impact

The RBI directive prohibits the bank from disbursing payments, entering into compromises, or disposing of assets without written approval. However, the bank is permitted to incur essential expenses such as salaries, rent, and electricity bills as specified in the directions.

Customers will not be able to withdraw funds from their accounts, though loans may be set off against deposits under certain conditions. These measures aim to safeguard depositor interests while addressing liquidity challenges faced by the bank.

Reasons Behind the Regulatory Action

The restrictions were imposed due to supervisory concerns arising from recent material developments in the bank’s operations. RBI had previously engaged with the bank’s Board and senior management to improve its functioning, but adequate corrective measures were not implemented.

The lack of concrete efforts to resolve these issues and protect depositors necessitated the issuance of these directions. RBI stated that the action is intended to stabilise the bank’s financial position and prevent further deterioration.

Deposit Insurance and Customer Protection

Eligible depositors will receive insurance coverage of up to ₹5,00,000 under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961. Claims will be processed after depositors submit their willingness and verification is completed.

Customers can contact bank officials for assistance or visit the DICGC website for detailed information. This provision ensures that small depositors have a safety net despite the operational restrictions imposed on the bank.

Duration And Future Course of Action

The directions will remain in force for six months from December 18, 2025, and are subject to review by the RBI. The regulator clarified that these restrictions should not be construed as cancellation of the bank’s licence.

The bank will continue to operate under the specified conditions until its financial health improves. RBI will monitor the situation closely and may modify the directions if circumstances warrant, keeping depositor interests as the primary focus.

Read More: RBI Intervention Stabilises Rupee Despite Global Risk Aversion.

Conclusion

The RBI’s action against The Valsad Mahila Nagrik Sahakari Bank underscores the importance of regulatory oversight in safeguarding depositors. With strict restrictions on lending, withdrawals, and investments, the bank’s operations will remain limited for six months.

Deposit insurance coverage offers some relief to customers during this period. The regulator’s continued monitoring indicates that further steps will depend on the bank’s efforts to restore financial stability.

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