Mumbai-based New India Co-operative Bank found itself at the centre of a financial storm on February 14, as customers lined up outside its branches following the Reserve Bank of India’s (RBI) decision to bar the lender from conducting fresh business. The central bank’s move, which includes a six-month suspension on deposit withdrawals and new loans, has left depositors anxious about their funds and raised questions about the bank’s financial health.
The RBI’s directive, issued on February 13, 2025, cited “supervisory concerns” and the bank’s liquidity position as the primary reasons for the restrictions. While the central bank did not elaborate on the specifics of these concerns, it emphasised that the action was necessary due to “recent material developments” at the bank and aimed at protecting the interests of depositors.
Under the RBI’s circular, New India Co-operative Bank is prohibited from granting or renewing loans, making investments, borrowing funds, or accepting fresh deposits without prior written approval from the regulator. Additionally, the bank cannot disburse payments, enter into any compromise arrangements, or sell or transfer its assets. These restrictions are set to remain in force for six months, during which the RBI will closely monitor the bank’s position and take further action as needed.
However, the RBI clarified that the bank’s license has not been cancelled, and it will be allowed to incur essential expenditures such as employee salaries, rent, and electricity bills.
The sudden restrictions have left many depositors in a state of panic. Seema Waghmare, a customer of the bank, expressed her frustration, stating, “We deposited money just yesterday (February 13), but they did not say anything... They should have told us that this was going to happen. They are saying that we will get our money within three months, but we have EMIs to pay. We have no idea how we will manage.”
To address depositors’ concerns, the RBI highlighted that eligible depositors can recover up to ₹5 lakh through the Deposit Insurance and Credit Guarantee Corporation (DICGC). The central bank assured that depositors would receive their insured amounts within approximately 90 days, subject to verification and submission of willingness by the concerned individuals.
In a notice posted outside the bank, the acting CEO sought to reassure customers, stating, “The RBI imposition on the bank is in the interest of the depositors. Your deposit up to ₹5 lakh with us is insured with DICGC of India, is safe, and is expected to be paid by them in around 90 days. Requesting your patience till then.”
New India Co-operative Bank’s current predicament is not entirely unexpected, given its recent financial performance. The bank has been grappling with losses over the past two fiscal years, reporting a net loss of ₹23 crore in the financial year ended March 2024, following a loss of ₹31 crore in fiscal 2023.
The bank’s advances have also declined, dropping to ₹1,175 crore as of March 31, 2024, from ₹1,330 crore a year earlier. While its deposits saw a marginal increase to ₹2,436 crore from ₹2,406 crore, the overall financial health of the bank remains under scrutiny.
The RBI’s intervention underscores the challenges faced by co-operative banks in maintaining financial stability. While the restrictions aim to safeguard depositors’ interests, they also highlight the need for stronger regulatory oversight and better risk management practices in the sector.
For now, customers of New India Co-operative Bank must wait patiently as the RBI works to resolve the situation. The central bank’s assurance of deposit insurance up to ₹5 lakh provides some relief, but the incident serves as a reminder of the importance of choosing financially stable banking partners. For those looking to grow their wealth, this situation also highlights the importance of diversifying investments. While traditional banking remains a cornerstone of financial security, exploring options to invest in stocks or other asset classes can provide additional avenues for growth and stability.
As the six-month restriction period unfolds, all eyes will be on the RBI and New India Co-operative Bank to see how they navigate this crisis and restore confidence among depositors.
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