Banks have been asked by Reserve Bank of India in an informal communication to stay away from dealing with bitcoin / cryptocurrency exchanges in India. All Indian banks are no longer allowing the users to deposit or withdraw money to their banks. All the cryptocurrency exchanges in India were raided by tax department last month where they took data of all users for hiding the wealth from the government and not paying taxes on the capital gains.
The Reserve Bank of India has given out multitude warnings to users and bitcoin dealers to stop cryptocurrency trading but many have asked government to make concrete rules. The government even set up a panel to explore possibilities of regulating the cryptocurrency trading in India. The panel told the government to instead ban bitcoin in India. In the report, they mentioned about fake ICOs (hirebits ICO) and coins (Obizcoin, BuyUCoin, BFXcoin etc) that were made specifically to fool the Indian trader.
That being said, an official statement about ban or making the cryptocurrencies illegal in India is yet to be made public. The exchanges made full use of this opportunity and got thousands of registrations everyday. Now, they are blaming the government for telling the banks to disable withdrawals and deposits.