Mumbai: Funds of over a lakh depositors and several cooperative housing societies are stuck with New India Cooperative Bank after it was placed under moratorium by RBI on Thursday. RBI said the restrictions were imposed “due to supervisory concerns” over “recent material developments in the bank, and to protect the interest of depositors…”
The action follows a spot inspection and a complaint filed by the bank’s chief compliance officer with the Economic Offences Wing over alleged funds misappropriation by staff. A police source said a bank official would be called to record his statement. RBI has dissolved the bank’s board for mismanagement and appointed an administrator and a committee of advisers to restore operations and revive the bank. Bankers speculate that operations are likely to be taken over by another cooperative bank.
Anxious depositors thronged branches across the Mumbai region. They were greeted by banners in the name of the ‘Acting CEO’ that said deposits up to Rs 5 lakh were insured and would be released “in around 90 days”. But no bank staff was at hand to answer queries.
Pandurang Kamble, an account holder in the Virar branch for the last 22 years, said, “I have 5 lakhs in fixed deposits. My salary is also credited in this account. If there is no refund after 90 days then what? My wife is a cardiac patient, what will happen to her once I break this news? The govt should step in and help us.”
The Reserve Bank of India (RBI) has appointed Shreekant, former chief general manager of State Bank of India (SBI) as ‘Administrator’ to manage the affairs of the New India Cooperative bank during the moratorium while restrictions are in force on withdrawals by account holders.
It has also appointed a Committee of Advisors, which includes Ravindra Sapra (former general manager, SBI) and Abhijeet Deshmukh (chartered accountant), to assist the administrator during the transition.
RBI has assured small savings account holders that their investments are safe. It said, “eligible depositors would be entitled to receive deposit insurance claim amount of their deposits up to a monetary ceiling of Rs 5,00,000 per deposit from the Deposit Insurance and Credit Guarantee Corporation (DICGC), as applicable under the provisions of the DICGC Act, 1961.”
Deposits coming under the Rs 5 lakh insurance cover over 90% of the bank’s 1.3 lakh depositors (see graphic). The likelihood of depositors getting their full money would depend on the extent of losses reported by the bank for March 2025.
The bank has 28 branches in Maharashtra and Gujarat. New India Cooperative Bank was founded as Bombay Labour Co-operative Bank in 1968 by late parliamentarian George Fernandes.
It was renamed as New India Cooperative Bank after the Emergency.
The bank reduced its accumulated losses from Rs 30.7 crore in FY23 to Rs 22.8 crore as of Mar 31, 2024. However, its advances portfolio decreased by Rs 155 crore (11.7%) to Rs 1174.8 crore as of Mar 31, 2024. Deposits increased by Rs 30.5 crore (1.3%) to Rs 2,436 crore as of Mar 31, 2024. Advances portfolio stood at Rs 1175 crore, working capital was Rs 2,997 crore, and total reserve funds were Rs 292.9 crore.
Under RBI directions, the bank is restricted from allowing withdrawals from savings or current accounts but can set off loans against deposits under certain conditions.
Essential expenditures such as salaries, rent, and electricity bills are permitted as per RBI’s directions.
It cannot also grant or renew loans and advances, make investments, incur liabilities (including borrowal of funds and acceptance of fresh deposits), disburse payments, enter into compromises, or dispose of properties or assets without RBI’s prior approval.
“The Bank has shifted its Virar Branch to nearby location after obtaining necessary permission from RBI. The Bank has merged its Shanti Park, Mira Road Branch with Poonam Garden, Mira Road Branch and Wakad, Pune Branch with Bibwewadi Branch to curtail rent & other administrative cost to improve profitability of the Bank,” said vice chairman, Gauri Bhanu in her letter to members last year.
