The Reserve Bank of India has barred Mumbai-based New India Co-operative Bank from giving out new loans, accepting new deposits and suspended withdrawals for six months, citing supervisory concerns and the lender’s financial health.
Following the February 13 order, depositors can’t withdraw money from their savings, current or any other account during the period. The bank be allowed to pay for employee salaries, rent and utility bills.
"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.
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.
The RBI’s curbs have triggered panic among customers, several of whom gathered outside the bank’s branches in Mumbai on February 14.
"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 three months... We have EMIs to pay, we have no idea how we will do all of that," Seema Waghmare, a customer of the New India Co-operative Bank, told ANI.
Another customer voiced similar concerns. "We have been standing in line since morning. We have been told that we will get our money after 2-3 months. Who knows if we'll even get it back?" the customer said. “How will we trust any bank now? I have Rs 40,000 deposited in the bank.”
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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.
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