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RBI supersedes New India Co-operative Bank board for 12 months after imposing restrictions over lending irregularities
- RBI's action was necessitated due to certain material concerns emanating from poor governance standards observed in the Mumbai-headquartered New India Co-operative Bank.
The Reserve Bank of India (RBI) on Friday, February 14, superseded the board of Maharashtra-based New India Co-operative Bank for 12 months, one day after imposing several restrictions, due to poor governance standards and irregularities in its lending business. The RBI has barred account holders and depositors from withdrawing money from the lender for six months.
The central bank appointed an administrator to revive the lender. The action, taken only in situations where depositors' interests are at risk, came after the RBI found misappropriation of funds at New India Co-operative Bank. The central bank said it found material supervisory concerns at the lender.
New India Co-operative Bank customers rush to access accounts
Hundreds of account holders and customers gathered at the bank's Mumbai branch on Friday following RBI restrictions, including a bar on issuing new loans and suspending deposit withdrawals for six months. Long queues of harried customers thronged the cooperative bank's branches, hoping to access their savings, but they were denied entry into the premises.
Other customers at the branch in Andheri, which had a heavy posse of policemen outside, said only those having hired lockers were allowed into the premises on Friday, and bank officials had locked themselves up inside.
According to reports, 90 per cent of the 1.3 lakh depositors will get their entire deposits back, as up to ₹5 lakh is covered under deposit insurance from the Deposit Insurance and Credit Guarantee Corporation (DICGC), as applicable under the provisions of the DICGC Act, 1961, based on submission of willingness by the depositors concerned and after due verification.
Depositors have been advised to contact the bank officials for further information, and details can be accessed on the DICGC website. However, several customers claimed that they have not received any communication from the bank on when they will be able to access their bank accounts.
Also Read: RBI cancels March 31 bank holiday: PSBs, private banks to stay open for fiscal-end closures
RBI's order against New India Co-operative Bank
According to the official statement, the RBI has appointed Shreekant, a former Chief General Manager of the State Bank of India (SBI), as the administrator to manage the affairs of New India Co-operative Bank.
The central bank has also appointed a 'Committee of Advisors' to assist the Administrator in discharging his duties. The members of the Committee of Advisors are Ravindra Sapra (former General Manager, SBI) and Abhijeet Deshmukh (Chartered Accountant).
The action was necessitated "due to certain material concerns emanating from poor governance standards observed" in the Mumbai-headquartered bank. The bank's chief compliance officer (CCO) approached the Mumbai Police's Economic Offence Wing after discovering some lapses in the RBI's 'spot inspection' of its books.
According to reports, the issue pertains to the misappropriation of funds by some bank staff members. On Thursday, the RBI prohibited the bank from issuing new loans and suspended deposit withdrawals and superseded the bank's board for mismanagement on Friday.
The restrictions came into force at the close of business on Thursday, will remain in force for six months, and are subject to review. "Considering the bank's present liquidity position, the bank has been directed not to allow withdrawal of any amount from savings bank or current accounts or any other account of a depositor," the RBI said while imposing the restrictions.
However, the lender has been allowed to set off loans against deposits subject to the conditions stated in the RBI directions. It may also incur expenditures on certain essential items such as employee salaries, rent, and electricity bills.
The RBI said that as of the close of business on February 13, the bank shall not, without prior approval, grant or renew any loans and advances, make any investment, or incur any liability, including acceptance of fresh deposits. It said the directions were necessitated due to supervisory concerns emanating from the recent developments in the bank and to protect the interest of bank depositors.
As of March 2024, the bank had 28 branches. Its overall assets decreased to ₹1,175 crore from the year-ago period's ₹1,330 crore, and the gross non-performing assets ratio increased to nearly 7.96 per cent as of March 31, 2024. Most of the bank's 28 branches are located in the Mumbai megapolis, and it also has two branches at Surat in neighbouring Gujarat and one in Pune.
The overall deposit base increased marginally to ₹2,436 crore at the end of FY24 from ₹2,406 crore in the year-ago period. According to the bank's annual report, over two-thirds of the deposits are term deposits. The bank was started in 1968 by a state-run general insurer staffers with a similar name.
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Business NewsIndustryBankingRBI supersedes New India Co-operative Bank board for 12 months after imposing restrictions over lending irregularities
First Published:14 Feb 2025, 08:02 PM IST
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