Lokapavani Mahila bank, Mandya: RBI keeps Rs 30,000 withdrawal limit in force

The Enforcement Action

The Reserve Bank of India has extended its regulatory Directions on Lokapavani Mahila Sahakari Bank Niyamitha, Mandya, by a further three months. The new deadline is the close of business on January 30, 2027. The extension was announced in RBI Press Release 2026-2027/1400 dated October 28, 2026, signed by Chief General Manager Brij Raj, and keeps the restrictions on the Karnataka co-operative bank in place beyond their previous expiry on October 30, 2026.

The Directions were first issued under sub-section (1) of Section 35A read with Section 56 of the Banking Regulation Act, 1949, vide Directive No. BLR.DOS.SSMS.No.S628/09-01-242/2025-2026 dated July 29, 2025. The extension is subject to review. In the release, the RBI says it "is satisfied that in the public interest, it is necessary to further extend" the Directive.

The central restriction for ordinary customers is unchanged. Under the original Directions, depositors may withdraw no more than Rs 30,000 of the total balance held across their savings, current or other accounts with the bank. The release states that all "other terms and conditions of the Directive under reference, shall remain unchanged."

This is a supervisory action on the bank's financial position. None of the RBI releases in this matter alleges fraud or names any individual for wrongdoing. The October 28 release also cautions that the extension "should not per-se be construed to imply" that the RBI is satisfied with the bank's financial position. The bank has not publicly responded to the extension.

How the Scheme Worked

There is no investment scheme or misconduct at the centre of this matter. What the RBI's releases describe is a sequence of supervisory concerns, followed by a restriction regime that has now been extended three times. Here is how that regime works and how it has developed.

According to the RBI's original Press Release 2025-2026/808 dated July 30, 2025, the regulator had "in the recent past engaged with the Board and Senior Management of the bank for improvement in its functioning." The RBI said the Directions became necessary because of a "lack of concrete efforts taken by the bank to address the supervisory concerns" and to protect depositors' interests.

From the close of business on July 30, 2025, the bank was barred from taking a range of actions without the RBI's prior written approval. It could not grant or renew any loans and advances, make any investment, or incur any liability, including borrowing funds and accepting fresh deposits. It also could not 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 the July 29, 2025 Direction specifically allowed. The bank was told to display a copy of the Direction on its website or premises for the public to read.

Citing "the bank's current liquidity position," the RBI capped withdrawals at Rs 30,000 per depositor across all accounts. The bank was allowed to set off loans against deposits, subject to the conditions in the Directions. It was also allowed to pay certain essential expenses, such as staff salaries, rent and electricity bills.

The Directions were originally set to last six months, until the close of business on January 30, 2026. Since then the RBI's releases record three extensions:

• January 28, 2026 (Press Release 2025-2026/2003): extended by three months to April 30, 2026.
• April 27, 2026 (Press Release 2026-2027/153): extended by six months to October 30, 2026.
• October 28, 2026 (Press Release 2026-2027/1400): extended by three months to January 30, 2027.

By the new deadline, the bank will have operated under these restrictions for 18 months. Each extension notice has carried the same caution that it does not signal RBI satisfaction with the bank's financial position.

The Law Invoked

The RBI's releases cite Section 35A read with Section 56 of the Banking Regulation Act, 1949. Section 35A empowers the RBI to issue directions to banks when it considers this necessary in the public interest, in the interest of depositors, or to keep a bank's affairs from being run in a way that harms depositors. Banks must follow these directions, and the RBI can modify or cancel them. Section 56 applies the Act, with modifications, to co-operative societies carrying on banking business. That is why a co-operative bank such as Lokapavani falls within the RBI's reach.

The original release also refers to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961. Under this law, eligible depositors of an insured bank are protected up to a monetary ceiling, which the RBI states is Rs 5,00,000 per depositor "in the same capacity and in the same right."

These are regulatory powers, not penal ones. The Directions are an administrative supervisory tool. They do not amount to a finding by a court or tribunal, and they are not a penalty for any proven offence.

What Happens Next

The extended Directions run until the close of business on January 30, 2027, and remain "subject to review." The July 2025 release states that the RBI "continues to monitor the position of the bank" and will take necessary action, including modifying the Directions, "as warranted, depending upon circumstances and in the interest of the depositors."

Directions of this kind can end in several ways. The RBI can relax or withdraw them if the bank's position improves. It can extend them again. It can take further regulatory steps. The RBI releases in this matter do not say which of these, if any, it expects. Readers should not treat any one outcome as more likely than another.

The RBI has also stated that the Directions themselves "should not per se be construed as cancellation of the banking license." The bank "will continue to undertake banking business subject to restrictions specified in the said Directions till its financial position improves." In practice, the branches stay open, but most activity beyond capped withdrawals, set-offs and essential expenses needs prior RBI approval.

What It Means

For depositors, the most practical point is the DICGC cover. According to the RBI's July 2025 release, eligible depositors are entitled to receive deposit insurance claims of up to Rs 5 lakh. Payment depends on depositors submitting their willingness and on due verification. Depositors can contact bank officials for details, and further information is on the DICGC website, www.dicgc.org.in. Depositors whose balances are above the cover limit, or whose funds are held in more than one capacity, should check how the "same capacity and same right" rule applies to them.

For anyone who keeps money with a smaller co-operative bank, the matter is a reminder to check publicly available information. The RBI publishes every Section 35A Direction and every extension as a press release on its website. A quick search of the RBI press-release archive for a bank's name will show whether any restrictions are in force. Spreading deposits so that each bank holds no more than the insured limit is a widely used precaution.

Section 35A Directions on co-operative banks are not unusual. The RBI uses them as a holding measure while it assesses a bank's position. The pattern seen here, where a six-month directive is followed by repeated shorter extensions, generally means the supervisory concerns have not yet been resolved. It does not, on its own, mean the bank's licence is at risk or that any wrongdoing has been found.

FAQ

What exactly did the RBI order?

On October 28, 2026, the RBI extended its Directions on Lokapavani Mahila Sahakari Bank Niyamitha, Mandya, for three more months, from October 30, 2026 to January 30, 2027. The original Directions bar the bank from lending, investing, accepting fresh deposits or disposing of assets without prior RBI approval, and cap depositor withdrawals at Rs 30,000.

Has the RBI alleged fraud at the bank?

No. The RBI's releases say the Directions were issued because of supervisory concerns and the bank's liquidity position, after the RBI had engaged with the bank's Board and senior management. None of the releases alleges fraud or names any individual for wrongdoing. The action is regulatory, not criminal.

Has the bank lost its banking licence?

No. The RBI's July 2025 release states that the Directions "should not per se be construed as cancellation of the banking license." The bank continues to carry on banking business, subject to the restrictions, until its financial position improves.

How much can a depositor withdraw?

According to the RBI's July 2025 release, a depositor may withdraw no more than Rs 30,000 of the total balance held across savings, current or other accounts with the bank. The bank may also set off loans against deposits, subject to the conditions in the Directions.

What should affected depositors do?

The RBI states that eligible depositors may receive deposit insurance of up to Rs 5 lakh from the DICGC, based on submitting their willingness and after due verification. Depositors should contact bank officials for the process and can find details at www.dicgc.org.in.

Where can I read the official releases?

All four RBI press releases in this matter are on the RBI website. The latest, Press Release 2026-2027/1400 dated October 28, 2026, is linked below, along with the original July 30, 2025 release that sets out the full terms of the Directions.

This report is based on the official RBI press release dated October 28, 2026 and the original RBI press release dated July 30, 2025 setting out the Directions, both published by the Reserve Bank of India.