Bank in Crisis: RBI stops Customers of this Bank from Withdrawing Money; What rights do Depositors have?
The Reserve Bank of India (RBI) has put certain restrictions on Shirpur Merchants’ Co-operative Bank and customers of this bank cannot withdraw money from their bank accounts. In its latest direction, RBI strictly mentioned that the bank cannot accept new deposits nor give money to its customers as the bank is currently facing financial crunches.
Thousands of cooperative bank depositors are panicked as they are now unable to access their savings after this decision by RBI.
RBI said, these directions are subjected to review and for a period of 6 months shall remain in force from the close of business on April 8, 2024.
What does the moratorium of Shirpur Merchants’ Co-operative Bank mean?
The above RBI’s direction should not be taken as the cancellation of the bank license. Till the bank’s financial position shows some improvement, it will continue to operate its banking business with restrictions. RBI may consider modifying the above-imposed directions according to the circumstances.
It is not the first time RBI has put such restrictions on banks. Previously, the reserve bank imposed similar withdrawal restrictions on YES Bank and PMC Bank.
What rights do depositors have if a bank fails?
Each depositor of the bank has a deposit insurance cover which is Rs.5 lakh, in case of failure of the bank. This insurance cover includes the principal amount and interest amount in their accounts as per the Deposit Insurance and Credit Guarantee Corporation Act. The insurance cover amount undertakes all deposits made simultaneously, whether the amount is kept in the current account, savings account, fixed deposits or another type of account.
What will depositors of Shirpur Merchants’ Co-operative Bank receive?
Under the provisions of Section 18A of the DICGC (Amendment) Act 2021, each eligible depositor of the bank will receive a deposit insurance claim amount in the same capacity and in the same right of his/her deposits up to Rs.5,00,000 monetary ceiling. And it depends on the concerned depositors’ surrender of their willingness.
