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RBI Puts Rs 1,000 Withdrawal Cap on Deccan Urban Co-op Bank; Fresh Loans, Deposits Restricted

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The Reserve Bank on Friday said it has barred Karnataka-based Deccan Urban Co-operative Bank Ltd from granting fresh loans or accepting deposits and customers cannot withdraw more than Rs 1,000 from their savings account for a period of six months. The lender has also been asked not to make fresh investments or incur any liability without its prior permission.

The RBI said it issued the directions to chief executive officer of the bank on Thursday (February 18). It has also asked the lender to desist from disbursing any payment whether in discharge of its liabilities or otherwise, or dispose of any of its assets except as notified in the RBI direction.

“Considering the bank’s present liquidity position, a sum not exceeding Rs 1000 only of the total balance across all savings bank or current accounts or any other account of a depositor, may be allowed to be withdrawn,” RBI said in a release on Friday. It said customers can set off their loans against deposits subject to conditions.

“However, 99.58 per cent of the depositors are fully covered by the DICGC insurance scheme,” said the regulator. The Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of RBI, provides insurance cover on bank deposits. The RBI further said putting the bank under restrictions should not be construed as cancellation of its banking license. The bank will continue to undertake banking business with restrictions till its financial position improves.

The Reserve Bank may consider modifications of the directions depending upon circumstances. The directions are set to remain in force for six months from the close of business on February 19, 2021 and are subject to review, it added.

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Moody’s Projects 13.7% Growth in FY’22, Expects 7% Contraction This Fiscal

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Moody’s on Thursday upped India’s growth projection for the next financial year beginning April 1, to 13.7 per cent, from 10.8 per cent estimated earlier, on the back of normalisation of activity and growing confidence in the market with the rollout of COVID-19 vaccine. For current fiscal, the US-based rating agency expects the economy to contract 7 per cent, lower than its previous estimate of 10.6 per cent contraction.

Moody’s Investors Service Associate Managing Director (Sovereign Risk) Gene Fang said “our current expectation is that in the current fiscal ending March 2021, the economy would contract 7 per cent… We expect a rebound of 13.7 per cent growth in the next fiscal on normalisation of activity and base effects.”

The very large rebound incorporates the view that recovery in activity will continue, with the rollout of vaccines and growing confidence in the market that activities are coming back to normal, Fang said in an online conference on India Credit Outlook 2021 organised by Moody’s and its India affiliate ICRA. ICRA Principal Economist Aditi Nayar said it expects 0.3 per cent growth in the third quarter (October-December) of current fiscal.

ICRA expects Indian economy to contract 7 per cent in current fiscal and growth to rebound to 10.5 per cent in the next fiscal beginning April 1. “Recession in India has ended,” she said, adding there could be upside to growth in FY’22 if government’s capital expenditure increases, budget announcements are implemented and vaccination drives are carried out.



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