The Reserve Bank of India (RBI) has put in place certain restrictions on Puducherry Co-operative Urban Bank Ltd such that the bank limits withdrawals of customers to ₹5,000 per customer due to issues with the financial condition of the bank. These restrictions have been in effect since the closure of business on October 21, 2026, for a period of six months.
The restrictions made by the Reserve Bank of India (RBI) do not only restrict the withdrawal amount but also prevent the bank from opening new accounts, issuing new loans, doing banking activities without written approval, and several other activities.
Among depositors of the bank, the first question that arises is the maximum amount of money that they will be able to withdraw from their accounts and the level of protection accorded to them. The eligible depositors of the bank can avail insurance of ₹5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Why Has the RBI Imposed Restrictions on the Bank?
The RBI expressed worries about the financial condition of the bank as well as its lack of proper measures to correct supervisory problems. According to the regulator, it worked out a plan for improving the functioning of the bank through its board and management.
Nevertheless, the regulator thought that more directions would be required to address its concerns and protect depositors’ interests. The limit on withdrawals is based on the liquidity of the bank, as stated in the RBI’s statement. The liquidity of the bank means its ability to pay off its obligations when they are required from customers and other participants. In case a regulator has serious doubts about the ability of the bank to work properly, it can impose some restrictions to limit transactions and assess the condition of the bank.
In such cases, regulators usually impose restrictions on lending, deposits, investments and payments. Thus, the restrictions on Puducherry Co-operative Urban Bank are the regulator’s decision, not a general rule for the whole Indian banking sector. The RBI stated that it would monitor the bank and could change directions based on the situation.
₹5,000 Withdrawal Limit: What Can Customers Withdraw?
As per RBI directions, the depositor would not be able to withdraw more than ₹5,000 from savings, current or any other type of account held with the bank as long as the directions prevail. This provision is quite essential for the customers who might have maintained higher balances in their accounts due to household expenditure needs, payments required for running their businesses or due to any other requirement.
It needs to be borne in mind by the customers that having multiple accounts with one and the same bank would not enable them to withdraw ₹5,000 from each account. As per the RBI direction, the amount of ₹5,000 has been fixed keeping the depositor and the concerned accounts in view. Customers may clarify the exact applicability of the order with the bank.
For instance, in case the customer has an outstanding balance of ₹80,000 in his account, then it doesn’t necessarily mean that the balance has been completely confiscated as per the provisions of the directions. It only implies that the customer cannot make withdrawals beyond the specified limit due to the prevailing directions.
What Other Banking Activities Are Restricted?
Apart from customer withdrawals, the RBI’s directions also prevent the bank from undertaking several other activities such as the following:
- Giving or renewing loans and advances.
- Investing funds.
- Accepting fresh deposits or raising borrowings.
- Payment towards any liabilities, other than those allowed by the directions.
- Making any compromise or arrangement that is not allowed under the directions.
- Disposing of property or any other asset, except where permitted.
The bank will be able to make payments for its essential requirements such as the salary of employees, rent, and electricity bills, among others, in line with the directions of the RBI. The bank is also allowed to set off loans against the deposits, subject to conditions given by the RBI.
These measures have been put in place to restrict some financial activities during the period of the RBI’s examination of the bank. Customers and borrowers may contact the bank to see how the directions apply to them.
Will Puducherry Co-operative Urban Bank Customers Lose Their Money?
Nevertheless, the withdrawal cap does not imply that the customers have irreversibly lost their deposits. Still, it places certain restrictions on access to the funds until the directions of the RBI prevail. The ultimate fate of the depositors depends on the condition of the bank and possible changes to the directions of the RBI as well as the applicability of the relevant deposit insurance procedures.
Eligible depositors might get insurance up to ₹5 lakh from the DICGC. The insurance depends on the relevant rules regarding the deposit accounts and their eligibility for the insurance as per the relevant regulations. It should not be perceived as the automatic payout of ₹5 lakh to each depositor. It is dependent upon the insured balance and the provisions of the DICGC. Also, it is important to differentiate between the restriction on withdrawing money and the insurance claim evaluation process.
What Is DICGC Deposit Insurance?
Deposit Insurance and Credit Guarantee Corporation is a wholly-owned subsidiary of the Reserve Bank of India which offers deposit insurance on eligible deposits deposited with the insured banks in India. Under the relevant scheme, deposit insurance usually insures eligible deposits for the value of ₹5 lakhs, inclusive of principal and interest, maintained by the eligible depositor in the same capacity and right at the same bank.
This implies that the computation of the insurance amount will not necessarily give each account of the eligible depositor maintained in the same bank the benefit of ₹5 lakh deposit insurance cover. The eligible accounts maintained by the eligible depositor in the same capacity and right are normally aggregated when determining the deposit insurance.
For instance, where the eligible depositor has a total insured balance of ₹4 lakhs in the qualifying accounts maintained in the same bank, then the amount could be within the ceiling of ₹5 lakhs. Where the eligible balance is ₹8 lakhs, then usually the ceiling of ₹5 lakhs shall apply. The actual claim payable will depend on the circumstances prevailing in the bank.
How Can Eligible Depositors Claim Up to ₹5 Lakh?
Eligible depositors may be entitled to receive a DICGC insurance claim under the applicable conditions.
Depositors should submit their consent for the DICGC claim and complete the verification process.
Customers may follow the below-stated procedures:
- Talk to the officials of the bank to learn about the process of making a claim.
- Find out what forms and information should be filled out.
- Submit your information as per the process.
- Verify that your claim and account details have been submitted correctly.
- Follow communications about the verification process and claim payment.
- Alternatively, customers can get official information about the process on the DICGC website www.dicgc.org.in.
Depositors should be aware of people who offer immediate claim compensation in return for money or personal details, including passwords or OTPs.
Has the RBI Cancelled the Bank’s Licence?
No. The RBI has explicitly stated that issuance of these directives alone should not be construed as the cancellation of the banking license of Puducherry Co-operative Urban Bank.
The bank is still permitted to undertake banking operations within the prescribed constraints laid down by the regulator. The restrictions are expected to stay in place for a period of six months starting from October 21, 2026 unless there is any modification or otherwise by the regulatory authority through the review process at the RBI.
Further, the RBI has indicated that it will keep an eye on the situation and may undertake other actions, including modification of the restrictions, based on the circumstances and depositors’ interest. Consequently, the customers must not assume anything either about resumption of banking services automatically or closure of the bank.
What Should Customers Do Now?
Clients of the Puducherry Co-operative Urban Bank have to ascertain their balance and understand which activities can still be carried out. Those customers who require that account to make necessary payments on a regular basis should review their current financial obligations and seek permission from the bank on any possible alternatives. Depositors are expected to keep their passbook, statements, deposit slip and relevant correspondence.
Such documents might prove handy while establishing their balances and claiming insurance, if necessary. They should stick to the official announcements of the Reserve Bank of India, the bank itself and the Deposit Insurance and Credit Guarantee Corporation and ignore rumours on social media. They should also avoid sharing their account details and paying any intermediary who claims that he can circumvent the restrictions on withdrawals. What is more important, the restrictions outlined above apply exclusively to Puducherry Co-operative Urban Bank Limited. Other bank clients should not consider their deposits to be under the restriction order.