Mumbai: Customers queue outside New India Co-operative Bank as RBI bars lender from fresh business

Mumbai: Customers queue outside New India Co-operative Bank as RBI bars lender from fresh business

Customers gathered outside Mumbai-based New India Co-operative Bank on February 14, a day after Reserve Bank of India barred the lender from issuing new loans and suspended deposit withdrawals for six months, citing supervisory concerns and the lender's liquidity position.

RBI said the directions were necessary due to concerns arising from "recent material developments" at the bank, and to protect the interest of depositors, although did not elaborate on the specifics of these concerns.

The RBI also ordered the co-operative bank not to make any investments or borrow funds.

"...from the close of business on February 13, 2025, the bank shall not, without prior approval of RBI in writing, grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets," said RBI in a circular.

Also, eligible depositors could recover up to Rs 5 lakh through the Deposit Insurance and Credit Guarantee Corporation (DICGC).

"The eligible depositors would be entitled to receive deposit insurance claim amount of their deposits up to a monetary ceiling of Rs 5 lakh in the same capacity and in the same right, from DICGC, based on submission of willingness by the depositors concerned and after due verification," said RBI.

#WATCH | Mumbai, Maharashtra: People gather outside the New India Co-operative Bank after the RBI issued a notice to halt all business pic.twitter.com/kkzXmCIMqe
ANI (@ANI) February 14, 2025

Seema Waghmare, a customer of the New India Co-operative Bank, told ANI: "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 3 months... We have EMIs to pay, we have no idea how we will do all of that..."

"The RBI imposition on the bank is in the interest of the depositors. Your deposit up to Rs 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. We would like to reassure you that your deposit with us continues to be safe and secure. We appreciate your understanding and cooperation in this matter," the acting CEO told depositors in a notice pasted outside the bank.

New India Co-operative Bank has been grappling with losses in the last two fiscal years, with the bank posting a loss of Rs 23 crore in the financial year ended March 2024, and a loss of Rs 31 crore in fiscal 2023, according to its annual report.

The bank's advances reduced to Rs 1,175 crore as of March 31, 2024, from Rs 1,330 crore a year earlier. Its deposits rose to Rs 2,436 crore from Rs 2,406 crore, reported Reuters.

RBI said the directions do not mean the lender's banking license is cancelled and that it will continue to monitor its position and take necessary actions as needed.

Restrictions on the lender will remain in force for six months. The bank may incur expenditure in respect of certain essential items such as salaries of employees, rent, electricity bills, etc, added RBI.

With inputs from Reuters