RBI takes control: New India Co-operative Bank’s board superseded amid crisis

Mumbai: The Reserve Bank of India (RBI) on Friday took strong action against the New India Co-operative Bank by removing its board of directors for a period of 12 months, effective from February 14.

This decision comes just one day after the RBI placed several restrictions on the bank, including stopping it from giving out new loans and accepting fresh deposits for six months.

The RBI also appointed Shreekant, the former Chief General Manager of the State Bank of India (SBI), as the “Administrator” to oversee the bank’s operations during this period.

To help him, a “Committee of Advisors” has been formed, consisting of Ravindra Sapra, former General Manager of SBI, and Abhijeet Deshmukh, a Chartered Accountant.

The restrictions placed on the bank have caused concern among its customers. Since February 13, depositors have been unable to withdraw money from their savings, current, or other accounts for six months.

However, the RBI assured that customers whose deposits are eligible will be able to claim a deposit insurance amount up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

In addition to halting new loans and deposits, the RBI has restricted the bank from making investments or taking on new liabilities without prior approval.

However, the bank can still use funds for essential payments like employee salaries and utility bills.

The RBI’s actions were triggered by concerns over the bank’s recent financial difficulties, and the central bank emphasised that these measures are aimed at safeguarding the interests of the bank’s depositors.

Meanwhile, the bank has been facing financial struggles for the past two years, including posting a loss of Rs 23 crore in the financial year 2023-24.

Although the bank’s advances decreased to Rs 1,175 crore from Rs 1,330 crore the previous year, its deposits slightly increased to Rs 2,436 crore from Rs 2,406 crore.

Despite these challenges, the RBI clarified that the bank’s licence has not been cancelled, and it will continue to monitor the situation closely.

–IANS