The Reserve Bank of India (RBI) has imposed operational restrictions on New India Cooperative Bank, a Mumbai-based multi-state scheduled bank, citing supervisory concerns and the lender's liquidity position. Under these restrictions, New India Cooperative Bank is prohibited from granting or renewing loans, making investments, incurring liabilities (including borrowing or accepting deposits), or disbursing any payments without prior written approval from the RBI. However, due to these restrictions, several customers and depositors rushed to withdraw money but were left helpless.
Meanwhile, RBI superseded the board of directors of New India Cooperative Bank for the next 12 months. It also appointed Shreekant, former chief general manager (CGM) of State Bank of India (SBI) as administrator to manage the affairs of the bank during this period. Further, to assist the administrator, RBI appointed a committee of advisors, which includes Ravindra Sapra (former GM of SBI) and Abhijeet Deshmukh (chartered accountant-CA) as members.
RBI's directions issued on Thursday night are effective for six months starting from 13 February 2025, aiming to address concerns related to the Bank's financial stability and protect the interests of its depositors, RBI says in a notification.
Additionally, the Bank cannot sell, transfer, or dispose of any of its properties or assets except as specified in the directive.
New India Cooperative Bank liquidity issues have led to a ban on withdrawals from savings, current, or other accounts. However, depositors may set off loans against their deposits, as outlined in the RBI directive. The Bank can still make payments for essential expenses such as employee salaries, rent, and utilities.
In a notice posted outside, the Bank's acting chief executive officer (CEO) stated, "The RBI imposition on the Bank is in the interest of the depositors. Your deposit of up to Rs5 lakh with us is insured by Deposit Insurance and Credit Guarantee Corporation (DICGC) of India) is safe and is expected to be paid by them in around 90 days. Requesting your patience till then. We would like to reassure you that your deposit with us continues to be safe and secure. We appreciate your understanding and cooperation in this matter."
New India Cooperative Bank has been grappling with losses in the last two fiscal years. During FY23-24 and FY22-23, the Bank had posted a net loss of Rs23 crore and Rs31 crore, respectively. According to a report from Reuters, New India Cooperative Bank's advances reduced to Rs1,175 crore as of 31 March 2024 from Rs1,330 crore a year earlier. Its deposits increased marginally to Rs2,436 crore from Rs2,406 crore.
To safeguard bank depositors, RBI has assured that eligible depositors will receive deposit insurance claims of up to Rs5 Lakh under the DICGC Act, 1961, subject to verification. For more details, depositors are encouraged to visit the DICGC website or contact the Bank.
While these restrictions do not imply the cancellation of the Bank's license, RBI says it will continue to monitor the situation and may revise the directions based on the Bank's financial recovery. The restrictions will remain in effect for six months, with the situation under regular review.
New India Cooperative Bank operates 28 branches, mainly in Maharashtra and Gujarat, with a significant presence in Mumbai.