New India Co-operative Bank Banned From Giving Out Fresh Loans, Deposits

New India Co-operative Bank, a Mumbai-based co-operative bank, has been barred from carrying out regular business by the Reserve Bank of India.

RBI Takes Action Against Bank

The country's central bank imposed this ban over supervisory concerns, in addition to concerns over the bank's liquidity.

The bank has been barred from issuing any loans for a period of 6 months. In addition, the withdrawals from deposits have also been barred.

In a statement, the central bank said, “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”

The Deposit Insurance and Credit Guarantee Corporation (DICGC) would pay eligible depositors of the troubled bank the deposit insurance claim amount of their savings up to a maximum of Rs 5 lakh.

As according to a report from Reuters, they have been vying in the recent past, with negative numbers to showcase. In fact, the bank posted losses of over 22 crore in the previous fiscal year, which ended in March 2024.

The RBI did clarify that these actions stopping regular business do not automatically result in the cancellation of the license of the bank, and that the RBI will be monitoring the bank's actions and will take necessary steps required.

Reaction

As per some reports that are now emerging, aueues of people were seen outside Mumbai-based New India Co-operative Bank.

Many anxious customers of the bank wanting to withdraw their money have now showed up at the bank branches after the Reserve Bank of India (RBI) on Thursday imposed several restrictions.

These restrictions include a prohibition on the withdrawal of funds by depositors, amid supervisory concerns.