In a decisive move, the Reserve Bank of India (RBI) has imposed a six-month operational ban on Mumbai-based New India Co-operative Bank Ltd., citing significant irregularities in its lending practices. This action has led to widespread concern among the bank’s customers, many of whom have rushed to branches in an attempt to secure their funds.
RBI’s Intervention
On February 13, 2025, the RBI announced restrictions on New India Co-operative Bank, prohibiting the institution from granting or renewing loans, making investments, incurring liabilities, or disbursing any payments without prior approval. The central bank also barred depositors from withdrawing funds for a six-month period, aiming to safeguard depositor interests amid allegations of fund misappropriation. Shreekant, a former Chief General Manager of the State Bank of India, has been appointed as the administrator for a 12-month term to oversee the bank’s operations.
Customer Reactions
Following the RBI’s announcement, numerous customers gathered at various branches of New India Co-operative Bank, seeking clarity and access to their funds. Reports indicate that depositors are unable to withdraw their money, leading to frustration and anxiety among account holders.
Financial Implications
As of March 31, 2024, New India Co-operative Bank reported deposits totaling Rs.24.36 billion and advances amounting to Rs.11.75 billion. Under current deposit protection regulations, deposits up to Rs.500,000 are insured and are expected to be reimbursed within 90 days. However, depositors with amounts exceeding this threshold face uncertainty regarding the recovery of their funds.
Historical Context
This is not the first instance of regulatory action against New India Co-operative Bank. In January 2024, the RBI imposed a monetary penalty of Rs.1.5 million on the bank for non-compliance with directives related to donations and contributions for public and charitable purposes.
Looking Ahead
The RBI’s decisive intervention underscores its commitment to maintaining financial stability and protecting depositor interests. While the immediate future remains uncertain for the bank’s customers, the appointment of an experienced administrator aims to address the underlying issues and restore confidence in the institution.
