The Reserve Bank of India (RBI) has placed stringent restrictions on Mumbai-based New India Co-operative Bank, effective February 13, 2025, following concerns over its financial stability and alleged mismanagement. The move has sparked panic among depositors, with crowds gathering at branches to demand access to their funds. Here’s a detailed overview of the situation:
Why Did the RBI Take Action?
The RBI cited “supervisory concerns” and “recent material developments” as the primary reasons for its intervention. Investigations revealed a deteriorating financial position, including consecutive annual losses of ₹30.75 crore (FY23) and ₹22.78 crore (FY24) . A spot inspection uncovered alleged misappropriation of funds by bank staff, prompting the bank’s Chief Compliance Officer to file a complaint with the Mumbai Police’s Economic Offences Wing . The RBI emphasized that these measures aim to protect depositors’ interests while the bank undergoes restructuring .
Key Restrictions Imposed by the RBI
1. Suspension of Financial Activities:
The bank cannot grant new loans, renew existing ones, accept deposits, or make investments without RBI approval.
2. Withdrawal Freeze:
Depositors cannot withdraw funds from savings, current, or fixed deposit accounts. Exceptions include salary payments, rent, and utility bills.
3. Asset Restrictions:
The bank is barred from selling or transferring assets.
4. Governance Overhaul:
The RBI dissolved the bank’s board and appointed Shreekant, a former SBI Chief General Manager, as Administrator. A committee including Ravindra Sapra (ex-SBI) and CA Abhijeet Deshmukh will assist in reviving operations .
These restrictions will remain for six months but may be extended or lifted based on the RBI’s review.
Impact on Customers
Depositors, including over 1.3 lakh account holders, face significant distress. Long-term customers like Pandurang Kamble, who has ₹5 lakh in fixed deposits, expressed desperation: *“My wife is a cardiac patient. What will happen to her once I break this news?”* . Others, such as Seema Waghmare, highlighted immediate financial struggles: “We have EMIs to pay, and no idea how we’ll manage”.
Branches in Mumbai and Thane saw chaotic scenes, with customers protesting and seeking clarity. However, bank staff were largely absent, leaving depositors reliant on banners stating that insured amounts (up to ₹5 lakh) would be released within 90 days.
Deposit Insurance: What’s Covered?
Under the Deposit Insurance and Credit Guarantee Corporation (DICGC), 90% of depositors (with balances under ₹5 lakh) are fully insured . Claims must be submitted for verification, though larger depositors face uncertainty depending on the bank’s eventual recovery.
This mirrors the 2019 PMC Bank crisis, where RBI intervention led to a takeover by Centrum Financial Services . While New India Co-operative Bank’s license remains intact, its revival hinges on stabilizing operations and addressing governance lapses. The RBI has not ruled out a merger or acquisition by another cooperative bank.
The RBI’s restrictions highlight systemic vulnerabilities in cooperative banks, urging depositors to stay informed about insured limits. For New India Co-operative Bank, the next six months will be critical in determining whether it can restore trust and financial health. Customers are advised to file DICGC claims promptly and monitor official updates.