New India Co-operative Bank crisis: RBI supersedes lender's board for 12 months

New India Co-operative Bank

The Reserve Bank of India (RBI) on February 14 announced that it has superseded the board of directors of New India Co-operative Bank for a period of 12 months. This comes a day after the central bank barred the Mumbai-based lender from giving out new loans, accepting new deposits and more for a period of six months.

RBI announced that is has appointed Shreekant, former Chief General Manager of State Bank of India (SBI), as 'Administrator' to manage the affected lender's affairs during this period. It has also appointed a 'Committee of Advisors' to assist Shreekant in discharging his duties. The committee will comprise 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 said in its press release.

Notably, CNBC-TV18 on February 14 reported that RBI's action came after its spot inspection raised supervisory concerns. The central bank's Chief Compliance Officer has filed a complaint with Mumbai Police EOW over the alleged fund misappropriation by the lender's staff.

Moneycontrol couldn't independently verify the report.

After RBI imposed curbs on the bank on February 13, several customers gathered in front of its branches. Following the order, depositors won't be able to withdraw money from their savings, current or any other account till 6 months.

"Considering the bank's 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 said in a release.

Also read: RBI curbs on New India Co-operative Bank: What next for depositors?

The central bank, however, said eligible depositors will be entitled to a deposit insurance claim amount of up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

"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 bank's acting CEO said in a notice pasted at bank’s branches.

New India Co-operative Bank has been grappling with losses for the past two fiscals. It posted a loss of Rs 23 crore in the financial year 2023-24. The bank's advances reduced to Rs 1,175 crore from Rs 1,330 crore a year earlier. Its deposits rose to Rs 2,436 crore from Rs 2,406 crore, reported Reuters.

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