Irinjalakuda Town Co-op Bank: RBI keeps Rs 10,000 withdrawal cap in place

The Enforcement Action

The Reserve Bank of India (RBI) has extended, for a further three months, the supervisory Directions that have restricted the business of The Irinjalakuda Town Co-operative Bank Ltd., Kerala since July 2025. In a press release dated October 29, 2026 (Press Release: 2026-2027/1404), the central bank said it "is satisfied that in the public interest" the Directive must continue beyond the close of business on October 30, 2026. The Directions now run to the close of business on January 30, 2027, subject to review.

The Directions were issued under sub-section (1) of Section 35A read with Section 56 of the Banking Regulation Act, 1949, vide Directive No. CO.DOS.SED.No.D-01/12-22-350/2025-2026 dated July 29, 2025, as the extension notice cites it. The original July 30, 2025 release gives the reference as CO.DOS.DSD.No.D-01/12-22-350/2025-2026. The period was last extended up to October 30, 2026 vide Directive No. DOR.MON.No.D-27/12.26.061/2026-27 dated July 21, 2026.

The most consequential term for the public is the withdrawal cap. Under the original Directions, the RBI said that, "considering the bank's liquidity position", depositors may withdraw no more than Rs 10,000 of the total balance held in savings, current or any other account. The latest notice states that "other terms and conditions of the Directive under reference, shall remain unchanged".

The RBI has also stressed, in every extension, that the move "should not per-se be construed" as a sign that it is satisfied with the bank's financial position. No public response from the bank to this latest extension was on record at the time of writing.

How the Scheme Worked

This is a supervisory action, not a fraud case: the RBI's releases do not allege any scheme or name any individual. What they describe is a bank that, in the regulator's words, did not do enough to fix problems the RBI had flagged. According to the July 30, 2025 release, the RBI had "in the recent past engaged with the Board and Senior Management of the bank for improvement in its functioning". It said that a "lack of concrete efforts" by the bank to address supervisory concerns, together with "non-infusion of capital funds to maintain minimum regulatory capital", made the Directions necessary to protect depositors.

The restrictions themselves are wide. From the close of business on July 30, 2025, the bank may not, without prior written RBI approval, grant or renew any loan or advance, make any investment, incur any liability (including borrowing funds and accepting fresh deposits), disburse or agree to disburse any payment, enter into any compromise or arrangement, or sell, transfer or otherwise dispose of any of its properties or assets, except as notified in the Direction. A copy of the Direction was ordered to be displayed on the bank's website and premises.

Within that freeze, the RBI carved out three things. Depositors may withdraw up to Rs 10,000 from their total balance. Borrowers may set off loans against deposits, subject to the Direction's conditions. And the bank may meet essential expenditure such as employee salaries, rent and electricity bills.

The procedural history is a steady chain of three-month extensions after the initial six months. The first period ran to January 30, 2026. A notice dated January 23, 2026 (Press Release: 2025-2026/1981) extended it to April 30, 2026, vide Directive No. DOR.MON.No.D-53/12.26.061/2025-26 dated January 19, 2026. A notice dated April 24, 2026 (Press Release: 2026-2027/141) extended it to July 30, 2026, vide Directive No. DOR.MON.No.D-08/12.26.061/2026-27 dated April 21, 2026. A notice dated July 24, 2026 (Press Release: 2026-2027/753) took it to October 30, 2026. The October 29 notice is the fourth extension, and on each occasion the RBI stated that the remaining terms were unchanged.

The Law Invoked

The Directions rest on Section 35A of the Banking Regulation Act, 1949, which the RBI's releases cite by its sub-section (1). The provision empowers the RBI to issue directions to banks, generally or to a particular bank, where it is satisfied that this is necessary in the public interest or to protect depositors' interests, among other grounds. It is the RBI's principal tool for placing a weak bank under a tight operating regime without cancelling its licence, and it allows the RBI to modify or cancel those directions later.

The releases read Section 35A with Section 56 of the same Act. Section 56 adapts the Banking Regulation Act's provisions so that they apply to co-operative societies carrying on banking business, which is what brings an urban co-operative bank such as this one within the RBI's direction-making powers.

The original release also refers to the DICGC Act, 1961, the statute under which the Deposit Insurance and Credit Guarantee Corporation insures bank deposits. It is the basis on which the RBI told eligible depositors they could claim insured amounts, as set out below.

What Happens Next

The Directions now run to the close of business on January 30, 2027, "subject to review". The July 2025 release set out the range of outcomes open to the RBI: it "continues to monitor the position of the bank and will take necessary actions including modifications of these Directions, as warranted". In practice, Section 35A directions on a co-operative bank can be relaxed if the bank's position improves, extended again, or followed by stronger measures. The releases make no prediction, and none should be read into them.

The RBI has been explicit that the bank's licence has not been cancelled. The July 2025 release said the Directions "should not per se be construed as cancellation of banking license" and that the bank "will continue to undertake banking business subject to restrictions" until its financial position improves.

For depositors, the immediate route is deposit insurance. The RBI said eligible depositors would be entitled to receive a deposit insurance claim of up to Rs 5,00,000 from the DICGC, "in the same capacity and in the same right", based on their submission of willingness and after due verification. Depositors were asked to contact bank officials for details, and the DICGC's website (www.dicgc.org.in) carries further information.

What It Means

For depositors of this bank, the practical position is unchanged: the Rs 10,000 cash withdrawal ceiling and the wider freeze on fresh lending, deposits and asset sales continue for another quarter. The extension does not, on the RBI's own wording, signal either improvement or deterioration. It simply keeps the protective regime in place while the regulator reviews the bank.

The wider lesson concerns deposit insurance. DICGC cover of up to Rs 5 lakh applies per depositor, per bank, "in the same capacity and in the same right", so balances held in the same name and capacity at one bank are added together before the limit applies. Savers who keep large balances at a single co-operative bank may wish to check how much of their money falls above that ceiling, and consider spreading deposits across banks.

Readers can also verify the status of any bank before depositing. The DICGC publishes a list of insured banks, and the RBI's press release page carries every Section 35A Direction, extension and modification by bank name. A bank operating under such Directions is required to display a copy on its website and premises. Checking those sources takes minutes and is the most reliable way to know whether a bank is trading under supervisory restrictions.

FAQ

What exactly did the RBI order on October 29, 2026?

The RBI extended its July 29, 2025 Directive on The Irinjalakuda Town Co-operative Bank Ltd., Kerala by three months, from the close of business on October 30, 2026 to the close of business on January 30, 2027, subject to review. It said the other terms and conditions of the Directive remain unchanged, and that the extension does not imply it is satisfied with the bank's financial position.

How much money can depositors withdraw?

Under the original Directions, the RBI directed the bank to permit withdrawal of a sum not exceeding Rs 10,000 of the total balance held in a depositor's savings, current or any other account, citing the bank's liquidity position. The October 2026 extension leaves the other terms unchanged. Borrowers may set off loans against deposits, subject to the conditions in the Directions.

Has the RBI alleged fraud or named anyone?

No. The RBI's releases describe a supervisory action, not a criminal case, and they name no individual. The regulator cited a lack of concrete efforts by the bank to address supervisory concerns and non-infusion of capital to maintain minimum regulatory capital. Readers should not treat the Directions as a finding of wrongdoing by any person.

Is my money insured?

According to the RBI, eligible depositors are entitled to receive a deposit insurance claim amount of up to Rs 5,00,000 from the DICGC, under the DICGC Act, 1961. The cover applies to deposits held in the same capacity and in the same right, and is paid on submission of willingness and after due verification. Depositors can contact the bank or visit www.dicgc.org.in.

Has the bank's licence been cancelled?

No. The RBI said the Directions should not be construed as cancellation of the banking licence, and that the bank will continue to undertake banking business, subject to the restrictions, until its financial position improves. The RBI added that it will continue to monitor the bank and may modify the Directions depending on circumstances.

Where can I read the official notices?

The latest extension is on the RBI website as Press Release 2026-2027/1404. The original Directions are set out in the RBI release of July 30, 2025. The bank has also been directed to display a copy of the Direction on its website and premises.

This report is based on the official Reserve Bank of India press release dated October 29, 2026, read with the RBI's original release of July 30, 2025 and its extension notices of January 23, April 24 and July 24, 2026.