Mumbai- A day after imposing several restrictions on city-based New India Co-operative Bank, the RBI on Friday superseded its board citing poor governance standards.
A large number of bank’s customers had gathered at its branches on Friday following RBI’s restrictions, which included a bar on issuing new loans and suspension of deposit withdrawals for six months. The bank has 28 branches, mostly located in the Mumbai region.
In a statement, the Reserve Bank of India (RBI) said it has appointed Shreekant, a former chief general manager of State Bank of India (SBI) as ‘Administrator’ to manage the affairs of the bank.
The Board of Directors of New India Co-operative Bank, Mumbai, has been superseded for 12 months, the RBI said in a statement.
It has also appointed a ‘Committee of Advisors’ to assist the Administrator in discharging his duties. The members of the Committee of Advisors are Ravindra Sapra (former General Manager, SBI) and Abhijeet Deshmukh (chartered accountant).
“The action is necessitated due to certain material concerns emanating from poor governance standards observed in the bank,” it said.
On Thursday, the RBI had imposed several restrictions on the lender including on withdrawal of funds by depositors, amid supervisory concerns.
The restrictions came into force from the close of business on Thursday and would remain in force for a period of six months and are subject to review.
“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…,” the RBI said while imposing the restrictions.
The lender, however, has been allowed to set off loans against deposits subject to the conditions stated in the RBI directions. It may incur expenditure in respect of certain essential items such as salaries of employees, rent, and electricity bills.
The RBI further said as from the close of business on February 13, 2025, the bank shall not, without prior approval, grant or renew any loans and advances, make any investment, and incur any liability, including acceptance of fresh deposits.
It further said the directions were necessitated due to supervisory concerns emanating from the recent material developments in the bank, and to protect the interest of depositors of the bank.
Further, eligible depositors would be entitled to receive deposit insurance claim amount of their deposits up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Fund Misappropriation Led To RBI Action
The RBI action on New India Co-operative Bank was prompted by alleged misappropriation of funds by the lender’s staffers, sources said on Friday.
Over 90 per cent of the city-based bank’s 1.3 lakh depositors have up to Rs 5 lakh in their accounts, and will be in a position to get their entire money by way of deposit insurance, they said.
As per the sources, the bank’s chief compliance officer (CCO) approached the Mumbai Police’s Economic Offence Wing on Thursday following the discovery of some lapses in a ‘spot inspection’ of its books by RBI.
The issue pertains to misappropriation of funds by some staff members of the bank, they said, without revealing the overall amount or the identities of the people involved.
The RBI had on Thursday prohibited the bank from issuing new loans and suspended deposit withdrawals, and followed it up by superseding the bank’s board for mismanagement on Friday.
It also appointed an administrator and a committee of advisors and tasked them with reviving the bank and restoring normal banking operations at the earliest.
As per the sources, over 90 per cent of the bank’s 1.3 lakh depositors have amounts up to Rs 5 lakh. The Deposit Insurance and Credit Guarantee Corporation covers amounts up to Rs 5 lakh, and experts opine that if the bank goes into liquidation, the depositors will be able to receive the amount.
As of March 2024, the bank had 28 branches. Its overall assets decreased to Rs 1,175 crore from the year-ago period’s Rs 1,330 crore, and the gross non-performing assets ratio increased to nearly 7.96 per cent.
Harried depositors of the bank had gathered at its branches on Friday following RBI’s restrictions, which included a bar on issuing new loans and suspension of deposit withdrawals for six months. The bank has 28 branches, mostly located in the Mumbai region.
The overall deposit base increased marginally to Rs 2,436 crore at the end of FY24 from Rs 2,406 crore in the year-ago period. Over two-thirds of the deposits are term deposits, as per the bank’s annual report.
The bank was started in 1968 by staffers of a state-run general insurer with similar name, and differs from peers in the cooperative banking world because it does not have any roots in a particular community. It does not have any political leanings either, as per people in the know.
In a statement, the Reserve Bank of India (RBI) said it has appointed Shreekant, a former chief general manager of State Bank of India (SBI) as ‘Administrator’ to manage the affairs of the bank. The Board of Directors has been superseded for 12 months.
RBI has also appointed a Committee of Advisors to assist the Administrator in discharging his duties. The members of the Committee of Advisors are Ravindra Sapra (former General Manager, SBI) and Abhijeet Deshmukh (chartered accountant).
“The action is necessitated due to certain material concerns emanating from poor governance standards observed in the bank,” it said.
On Thursday, the RBI had imposed several restrictions on the lender including on withdrawal of funds by depositors, amid supervisory concerns.
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