The Hindu : Tamil Nadu News : Co-operative bank stops business following RBI order

Online edition of India's National Newspaper
Friday, Apr 08, 2005

Tamil Nadu

Tamil Nadu

Co-operative bank stops business following RBI order

By Our Staff Reporter

SIVAGANGA, APRIL 7. The Sivaganga District Central Co-operative Bank Limited (SDCCB) has closed its business following directions from the Reserve Bank. The RBI has sent an urgent communication to the bank authorities to stop business activities, under Section 35A of the Banking Regulation Act, 1949, with effect from April 5.

The communication puts a bar on accepting fresh deposits, including savings bank and current accounts, fixed deposits or any other form of deposits. But, it allowed existing depositors to withdraw a maximum of Rs.1,000, subject to the liability.

The order has created panic among thousands of depositors. A large number of depositors assembled in front of the main branch here and 29 branches and asked the authorities to return their deposits immediately. The authorities had a tough time pacifying them.

No option: Chidambaram

Our Special Correspondent reports from Madurai:

In Madurai, the Union Finance Minister, P. Chidambaram, today said the RBI had "no option but to issue directions under Section 35 A of the Banking Regulation Act" as its repeated notices to the SDCCB to improve its financial position did not yield any favourable response.

He said he had requested a meeting with the RBI Governor on Friday "to explore ways and means to restore the banking operations of the DCCB." Nine DCCBs in the State, including the Sivaganga DCCB, did not comply with Section 11 (1) of the Banking Regulation Act.

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