RBI Imposes Operational Restrictions on Kanaka Pattana Sahakara Bank Niyamita

The Reserve Bank of India (RBI) has issued stringent Directions to Kanaka Pattana Sahakara Bank Niyamita, Davangere, citing concerns over the bank’s liquidity and supervisory compliance. The Directions, issued through directive dated March 11, 2026, take effect from the close of business on March 12, 2026.

These restrictions prohibit lending, accepting fresh deposits, making investments, and disbursing payments without RBI’s prior written approval. The RBI stated that the measures aim to safeguard depositor interests while the bank works on improving its financial position.

Details Of the Operational Restrictions

Under the Directions, the bank is barred from undertaking several standard banking activities. This includes granting or renewing loans and advances, making new investments, and incurring liabilities of any form.

The bank is also not permitted to disburse or agree to disburse payments, whether towards its obligations or otherwise. A notable restriction is the complete prohibition on withdrawals from savings, current, or other accounts due to its liquidity constraints.

Supervisory Concerns and Background

RBI indicated that these Directions follow prolonged engagement with the bank’s Board and senior management. According to the regulator, despite repeated interactions, the bank did not undertake concrete measures to address supervisory concerns identified earlier.

RBI highlighted that the absence of meaningful corrective steps, coupled with the need to protect depositor interests, compelled the imposition of the current restrictions. These developments point to deeper structural and financial issues within the bank’s governance framework.

Deposit Insurance Entitlement for Depositors

The RBI clarified that eligible depositors remain entitled to deposit insurance coverage through the Deposit Insurance and Credit Guarantee Corporation (DICGC). Under the DICGC Act, 1961, depositors may receive up to ₹5,00,000 in the same capacity and right after submitting their willingness and undergoing verification.

Depositors have been advised to contact bank officials for further guidance. Additional information can also be accessed on the DICGC website (www.dicgc.org.in). The availability of insurance coverage offers limited financial protection during this restriction period.

Duration And Nature of The Directions

The RBI emphasised that the Directions should not be interpreted as cancellation of the bank’s licence. The bank may continue its regular banking business, but only within the boundaries of the restrictions imposed.

The RBI will continue to monitor the bank’s position and may modify the Directions depending on evolving circumstances. These Directions will remain in force for 6 months starting from the close of business on March 12, 2026, and are subject to periodic review.

Read More: List Of 9 NBFCs That Surrendered Their Certificate of Registration to the RBI.

Conclusion

The RBI’s intervention in Kanaka Pattana Sahakara Bank Niyamita reflects concerns around liquidity, governance, and supervisory compliance. The restrictions are designed to safeguard depositor interests while preventing further financial deterioration within the bank.

Although withdrawals have been frozen, eligible depositors retain access to deposit insurance of up to ₹5,00,000. The bank remains operational under constraints, with the RBI closely observing developments.

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