The Reserve Bank of India has placed operational restrictions on Ahmednagar-based Ashok Sahakari Bank Ltd. for six months starting August 28, 2026. The directive prohibits fresh loans, deposit acceptance, and customer withdrawals, while eligible account holders remain protected up to ₹5,00,000 under DICGC insurance coverage.
MUMBAI — The Reserve Bank of India (RBI) on Friday, August 28, 2026, issued comprehensive regulatory directives against Maharashtra-based Ashok Sahakari Bank Ltd., Ahmednagar, restricting its key operational activities and halting customer deposit withdrawals with immediate effect.
Exercising powers under Section 35A read with Section 56 of the Banking Regulation Act, 1949, the central bank ordered the restrictions starting from the close of business on August 28, 2026. The action stems from mounting supervisory concerns and recent material developments affecting the bank's operational health. The intervention aims to safeguard depositors' capital following the cooperative lender's failure to address longstanding regulatory recommendations.
Operational Restrictions and Lending Prohibition
Under the newly enforced regulatory directive, Directive Ref. No. S4110/12-22-377/2026-27, Ashok Sahakari Bank Ltd. is barred from conducting standard financial transactions without prior written approval from the RBI.
The restrictions prohibit the lender from granting or renewing any loans and advances, making investments, incurring liabilities, or accepting fresh customer deposits. Additionally, the cooperative bank cannot sell, transfer, or dispose of any of its properties or assets, nor enter into financial compromise arrangements.
Regarding day-to-day operations, the bank is prohibited from disbursing payments, except for specified essential administrative expenditures such as employee salaries, rent, and utility bills.
Caps on Customer Withdrawals and Debt Set-Off Provisions
Considering the bank's present liquidity position, the central bank directed that customers will not be permitted to withdraw funds from their savings bank accounts, current accounts, or any other deposit accounts.
However, the regulatory framework permits a set-off mechanism. Borrowers holding outstanding loans with Ashok Sahakari Bank Ltd. are allowed to set off their loan accounts against their existing deposit accounts, subject to specific parameters outlined in the RBI directive.
DICGC Insurance Coverage and Protection Limits
Despite the temporary freeze on account withdrawals, eligible account holders remain protected under national deposit insurance guidelines.
Account holders are entitled to receive deposit insurance claims up to a monetary ceiling of ₹5,00,000 (Rupees Five Lakh only) per depositor in the same capacity and right. This coverage is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC) in accordance with the provisions of the DICGC Act, 1961.
Depositors must submit formal willingness and undergo verification processes coordinated through bank officials to claim insured amounts. Further operational details are available directly through official banking channels and the DICGC regulatory portal.
Regulatory Background and Compliance History
The central bank confirmed that it had previously engaged with the Board and Senior Management of Ashok Sahakari Bank Ltd. to seek corrective action and operational improvements.
The regulatory body noted that a lack of concrete efforts by the bank's management to resolve supervisory concerns necessitated the enforcement of strict administrative directions.
The central bank clarified that the directive does not constitute a formal cancellation of the banking license. Ashok Sahakari Bank Ltd. may continue limited operations under specified restrictions as long as the directions remain in force. The restrictions are scheduled to remain active for six months through February 28, 2027, subject to periodic regulatory review.
Official Sources
According to official press release Ref. 2026-2027/988 issued by Chief General Manager Brij Raj on August 28, 2026, the supervisory measures were taken directly by the Reserve Bank of India under statutory provisions of the Banking Regulation Act, 1949. Deposit insurance claim frameworks were verified under guidelines established by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Quote Section
"According to officials from the central bank, the issuance of directions was necessitated due to supervisory concerns emanating from recent material developments in the bank, and to protect the interests of depositors after a lack of concrete efforts taken by the bank to address operational issues."
Why It Matters
The regulatory intervention protects retail depositors from potential insolvency risks while preserving financial sector stability in Ahmednagar and surrounding regions. Account holders can access insurance protection up to ₹5 lakh via DICGC, ensuring partial or full capital recovery for small depositors. However, local businesses and residents with accounts above the insurance threshold or active credit facilities face short-term liquidity constraints while the bank's board works to improve its financial position.
Key Facts at a Glance
Regulatory Action: RBI imposed restrictions under Section 35A of the Banking Regulation Act, 1949, on Ashok Sahakari Bank Ltd., Ahmednagar, effective August 28, 2026.
Withdrawal Controls: Customer account withdrawals are completely halted, though loans can be set off against deposits under specific conditions.
Operational Restrictions: Banned from issuing fresh loans, accepting new deposits, acquiring liabilities, or selling assets without prior RBI approval.
Deposit Insurance: Eligible account holders are covered by DICGC deposit insurance up to a monetary ceiling of ₹5,00,000.
Validity Period: The directions remain in force for six months and are subject to ongoing review by banking regulators.
Frequently Asked Questions
Has RBI canceled the banking license of Ashok Sahakari Bank Ltd.?
No. The RBI explicitly stated that the issuance of these directions should not be construed as a cancellation of the bank's license. The bank will continue under operational restrictions until its financial health improves.
Can depositors withdraw money from their accounts?
Currently, depositors cannot withdraw funds from savings, current, or other deposit accounts. However, borrowers may set off their outstanding loan liabilities against their existing deposits as permitted under RBI rules.
How much money is protected under deposit insurance?
Eligible depositors can claim up to ₹5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under applicable legal provisions.
How long will these banking restrictions remain in place?
The directions will remain in effect for six months starting August 28, 2026, subject to review and potential modification by the central bank.
Source: Official Press Release (Ref. 2026-2027/988) issued by the Reserve Bank of India on August 28, 2026, and guidelines published by the Deposit Insurance and Credit Guarantee Corporation.
