The RBI has imposed restrictions on New India Co-operative Bank, barring it from granting loans, making investments, or allowing withdrawals due to financial concerns. Depositors can claim up Rs 5 lakh under DICGC.
PIC/NIMESH DAVE
The Reserve Bank of India (RBI) has imposed stringent restrictions on New India Co-operative Bank Limited, Mumbai, citing serious financial concerns. The central bank has barred the lender from undertaking key financial activities without prior approval, effective from the close of business on 13 February 2025.
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Why has RBI taken action?
According to the RBI’s official notice, The action comes after supervisory concerns raised over the bank's financial health, and it is aimed at safeguarding depositors’ interests. The restrictions significantly limit the bank's operational capacity, preventing it from granting or renewing loans, making investments, borrowing funds, accepting new deposits, or disbursing payments without prior RBI approval.
The bank has been facing financial struggles in recent years. The New India Co-operative Bank reported consecutive losses—Rs 227.8 million in the financial year ending March 2024, following a loss of Rs 307.5 million in the previous fiscal year. Its advances also declined to Rs 11.75 billion as of 31 March 2024, down from Rs 13.30 billion a year earlier, indicating a shrinking loan portfolio.
What restrictions has RBI imposed?
The RBI has prohibited the bank from:
- Granting or renewing loans and advances
- Making fresh investments
- Borrowing funds or accepting new deposits
- Disbursing payments except for essential expenses such as salaries, rent, and utility bills
- Selling, transferring, or disposing of its assets without prior RBI approval
In addition, the bank has been directed not to allow any withdrawals from savings or current accounts. However, depositors will be entitled to claim up to Rs 5,00,000 under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme.
Will the bank shut down?
Despite these restrictions, the RBI has clarified that the bank’s licence has not been cancelled. The lender will continue to operate under supervision, and the restrictions will remain in force for six months, during which the RBI will review the bank’s financial condition.
The situation mirrors previous interventions by the RBI, such as the action taken against Punjab and Maharashtra Co-operative Bank in 2019 due to financial irregularities. In that case, Centrum Financial Services eventually took over the struggling lender.
An email sent to the bank’s nodal officer seeking a response did not receive an immediate reply. Meanwhile, the RBI has assured that it will continue to monitor the situation and take further necessary actions in the interest of depositors.
The RBI’s intervention draws parallels to previous actions it took in cases of financial mismanagement, like in the 2019 case of Punjab and Maharashtra Co-operative Bank. There, RBI imposed curbs due to financial irregularities, eventually leading to a takeover.
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