RBI restricts Puducherry Co-op Urban Bank over financial deterioration

The Reserve Bank of India (RBI) on Wednesday placed Puducherry Co-operative Urban Bank under enhanced regulatory restrictions, citing the institution's deteriorating financial position. Among the measures, the central bank has capped individual customer withdrawals at Rs 5,000 per transaction, a step typically reserved for systemically troubled financial entities. The restrictions will remain effective for six months from close of business on October 21, 2026, and are subject to review based on the bank's progress in addressing supervisory concerns.

The RBI issued formal Directions to the bank under relevant sections of the Banking Regulation Act, 1949, following a period of engagement with its Board and Senior Management regarding operational improvements. The central bank stated that despite previous interventions, the bank has failed to demonstrate concrete efforts to address outstanding supervisory concerns or adequately protect depositor interests.

Depositors of the bank remain covered by deposit insurance protections, with eligible claimants entitled to receive up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC), providing a safeguard against potential losses. The RBI's action represents an escalation in supervisory action and signals the regulator's determination to contain systemic risk and prevent potential contagion in the banking sector.