Watch | What is a moratorium?
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A video explainer on moratoriums which will be imposed on banks’ operations by the federal government
On November 17, the Centre, appearing on the advice of the Reserve Bank of India, imposed a moratorium on Lakshmi Vilas Bank for a interval of 30 days.
The 94-year-old financial institution has been fighting losses for 3 years.
What is a moratorium?
The RBI has the ability to ask the federal government to have a moratorium positioned on a financial institution’s operations for a specified time period. Under such a moratorium, depositors won’t be able to withdraw funds at will.
Usually, there is a ceiling that limits the amount of cash that may be withdrawn by the financial institution’s clients.
In the case of Lakshmi Vilas Bank, depositors can’t withdraw greater than ₹25,000 through the one-month moratorium interval.
In most circumstances, the regulator permits for funds of a bigger quantum to be withdrawn in case of an pressing requirement however solely after the depositor offers the required proof.
Often, the moratorium is lifted even earlier than the initially stipulated deadline is reached.
Read extra right here: The Puucho Explains | What is a financial institution moratorium, and when does it come into play?
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