RBI Issues Strict Operational Directives for Jalna Merchants Co-operative Bank Amid Liquidity Concerns

RBI Issues Strict Operational Directives for Jalna Merchants Co-operative Bank Amid Liquidity Concerns​

Reserve Bank of India Imposes Major Operational Restrictions on Jalna Bank​

The Reserve Bank of India (RBI) has issued stringent directions to Motiram Agrawal Jalna Merchants Co-operative Bank Limited, Jalna. These directives were issued via a directive referenced as NGP.DOS.SED 2.No.S12/15-04-339/2026-2027, dated April 10, 2026.

These measures are imposed under Section 35 A read with Section 56 of the Banking Regulation Act, 1949. The directives significantly restrict the bank's operational scope immediately.

Critical Limitations on Lending and Transactions​

Effective from the close of business on April 10, 2026, the bank cannot undertake several key financial activities without explicit prior written approval from the RBI.

These limitations include granting or renewing any loans and advances. The bank is also prohibited from making investments or incurring any liability, including borrowing funds. Furthermore, accepting fresh deposits or disbursing payments, whether for obligations or otherwise, is restricted.

Asset Disposal and Account Management Protocols​

The RBI has placed restrictions on the bank's asset management. The bank cannot sell, transfer, or otherwise dispose of any of its properties or assets except as specifically notified in the RBI Direction.

In terms of customer accounts, the RBI mandated strict protocols. No amount from the total balance across all savings bank or current accounts, or any other account of a depositor, may be withdrawn. However, depositors are permitted to set off loans against deposits, subject to the conditions outlined in the directions.

Underlying Cause: Liquidity Shortfall and Governance Concerns​

The primary reason for imposing these directions is identified as a shortfall in the bank's liquid assets. The RBI stated that these actions followed engagement with the bank's Board and Senior Management.

However, the RBI noted that the issuance of these directives was necessitated by the bank's perceived lack of concrete efforts to address the critical liquidity issue. Additionally, the bank reportedly failed to sufficiently protect the interests of its depositors.

Depositor Protections and Ongoing Oversight​

The RBI clarified that receiving these directions does not equate to the cancellation of the bank's banking license. The bank will continue its banking business, but only subject to the specific restrictions imposed by the RBI.

The directives are set to remain in force for a period of six months from April 10, 2026, and are subject to subsequent review. The RBI confirmed it continues to monitor the bank's position and will take necessary actions as warranted in the interest of depositors.

Depositors remain protected under existing insurance frameworks. Eligible depositors are entitled to receive a deposit insurance claim amount up to a monetary ceiling of ₹5,00,000/- (Rupees Five Lakh only). This claim is available from the Deposit Insurance and Credit Guarantee Corporation (DICGC) upon the depositor's willingness and due verification.

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