The Reserve Bank of India (RBI) has issued regulatory directions against Kanaka Pattana Sahakara Bank Niyamita, Davangere, restricting several banking operations due to supervisory concerns.

Under powers exercised through Section 35A read with Section 56 of the Banking Regulation Act, 1949, RBI directed that from the close of business on March 12, 2026, the bank will not be allowed to grant or renew loans and advances, make investments, incur liabilities, borrow funds, or accept fresh deposits without prior RBI approval.

The bank has also been barred from allowing withdrawals from savings, current, or other deposit accounts due to its current liquidity position. However, it has been permitted to set off loans against deposits under specified conditions and incur expenses related to essential operations such as employee salaries, rent, and electricity bills.

RBI said it had previously engaged with the bank’s board and senior management to improve its functioning, but a lack of concrete corrective measures led to the issuance of these directions to safeguard depositor interests.

Eligible depositors will be able to claim deposit insurance up to ?5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under the provisions of the DICGC Act, 1961, subject to verification and submission of willingness by depositors.

The central bank clarified that the directions do not imply cancellation of the bank’s license, and the bank may continue limited banking operations subject to the imposed restrictions. The directions will remain in force for six months from March 12, 2026, and are subject to review depending on the bank’s financial position.