Alleged misappropriation of funds by staff at New India Co-operative likely reason behind RBI action

New India Co-operative Bank

The stringent action by the Reserve Bank of India (RBI), restricting New India Co-operative Bank’s business activity was invoked likely due to an alleged misappropriation of funds, Moneycontrol has learnt through sources.

The Chief Compliance Officer of the co-operative may have filed a complaint with the Economic Offences Wing (EOW), alleging misappropriation of funds by the bank staff, said sources. The action follows a spot inspection conducted by the central bank earlier this month.

Subsequently, on February 13, the central bank restricted the co-operative bank from doing fresh business and acceptance of fresh deposits, citing supervisory concerns.

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The release published by the central bank said that the bank shall not, without prior written approval of the regulator, grant or renew any loans and advances, or make any investment. The co-operative was also restricted from borrowing of funds or accepting fresh deposits, disbursal of any payment, or from entering in any arrangement to sell, transfer or dispose of any of its properties or assets.

Following RBI’s order, depositors shall not be able to withdraw funds from their savings, current or any other account with the bank for six months ending August 13, 2025. Read More

"Considering the 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 but is allowed to set off loans against deposits subject to the conditions," the RBI has said.

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Source also said the Administrator and Advisors have been asked to quickly assess the situation and restore normal banking operations, in an effort to revive the bank at earliest.

The RBI has also superseded the board of directors of New India Co-operative Bank for a period of 12 months, appointing Shreekant, former Chief General Manager of State Bank of India (SBI) as the 'Administrator' to manage the affairs. A 'Committee of Advisors' will be assisting him in discharging the duties, comprising of Ravindra Sapra (former General Manager, SBI) and Abhijeet Deshmukh (Chartered Accountant).

"The above action is necessitated due to certain material concerns emanating from poor governance standards observed in the bank," RBI’s press release had said.