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RBI Imposes Strict Restrictions on Nashik-Based Cooperative Bank, Customers Barred From Withdrawing Funds

The Reserve Bank of India (RBI) has imposed stringent restrictions on a cooperative bank in Maharashtra, leaving thousands of customers unable to withdraw money from their accounts. The central bank has taken supervisory action against the Lokenete RD Kshirsagar Cooperative Bank, located in Nashik district, after identifying serious regulatory and financial shortcomings during inspections.

According to the RBI, depositors of the affected bank will not be allowed to withdraw any funds from their savings, current, or other deposit accounts until further notice. The decision has raised concerns among customers, many of whom rely on the bank for daily financial needs. The restrictions came into effect after the close of business on December 16, 2025, and will remain in force for a period of six months, subject to review.

Why RBI Took Action Against the Bank

The central bank stated that the restrictions were imposed due to multiple supervisory deficiencies observed in the bank’s operations. These shortcomings indicated weaknesses in financial management, governance, and compliance with regulatory norms. To prevent further deterioration of the bank’s financial health and to safeguard depositors’ interests, the RBI decided to intervene with immediate effect.

Under the new directions, the cooperative bank is prohibited from disbursing new loans or renewing existing credit facilities without prior approval from the RBI. Additionally, the bank cannot make any fresh investments, accept new liabilities, or carry out payments of any kind during the restriction period. These measures aim to prevent the outflow of funds and stabilize the bank’s financial position.

Limited Operational Freedom Still Allowed

While the restrictions are severe, the RBI has clarified that the bank will not be completely shut down. To ensure that basic operations continue, the bank has been permitted to meet essential expenses. These include payment of staff salaries, office rent, electricity bills, and other unavoidable operational costs. This limited operational freedom is intended to keep the bank functioning at a minimum level while corrective measures are assessed.

The RBI also allowed the bank, under specified conditions, to adjust loans against deposits. This means that in certain cases, outstanding loans may be settled by adjusting them against the borrower’s deposits with the bank, provided the process follows regulatory guidelines.

Relief for Depositors Through Deposit Insurance

Amid the uncertainty, there is some relief for depositors. Eligible account holders can claim insurance coverage of up to ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC). This insurance mechanism is designed to provide financial protection to depositors in situations where banks face operational or liquidity crises. Customers whose money is stuck in the bank can seek compensation within the prescribed limits as per DICGC rules.

Duration and Review of Restrictions

The RBI has made it clear that these restrictions are temporary in nature. The six-month period will involve continuous monitoring and periodic reviews of the bank’s financial condition. Based on improvements or further deterioration, the central bank may modify, extend, or lift the restrictions as deemed necessary.

Importantly, the RBI emphasized that the imposition of these directions should not be interpreted as a cancellation of the bank’s license. The regulatory action is corrective rather than punitive, aimed at restoring stability and ensuring depositor protection.

What Customers Should Do Now

Customers of the Lokenete RD Kshirsagar Cooperative Bank are advised to stay informed through official RBI notifications and bank communications. Those eligible for deposit insurance claims should familiarize themselves with the DICGC process to avoid delays. Financial experts also suggest that depositors maintain proper documentation of their accounts and balances during this period.

The RBI’s intervention highlights the central bank’s commitment to maintaining discipline in the banking sector and protecting public money. While the restrictions may cause short-term inconvenience, they are intended to prevent larger financial risks and ensure long-term stability for depositors and the banking system as a whole.