RBI halts New India Co-op Bank operations: How to secure your savings

The announcement has triggered anxiety among account holders, many of whom depend on the bank for routine financial transactions. Experts advice to staying calm and keeping an eye on RBI guidelines

The Reserve Bank of India (RBI) has restricted New India Co-op Bank from issuing new loans, making investments, or accepting fresh deposits without prior approval, effective February 13. The bank has been directed not to allow withdrawal of any amount from savings or current accounts or any other account of a depositor.

 

In a circular, the RBI said, “...from the close of business on February 13, 2025, the bank shall not, without prior approval of RBI in writing, grant or renew any loans and advances, make any investment, incur any liability, including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets.”

 

The announcement has triggered anxiety among account holders, many of whom depend on the bank for routine financial transactions. On February 14, several customers gathered outside the bank’s branches in Mumbai, demanding clarity on the situation and access to their funds.

 

Siddartha Karnani, partner, King Stubb & Kasiva, Advocates and Attorneys explains what measures New India Co-operative Bank customers need to take immediately to cushion the impact on their savings.

 

First and foremost customers should stay calm and patient: While the situation is concerning, panic-induced actions can often lead to financial missteps. A well-informed and calculated approach is key to minimising the impact on personal finances.

 

Customers should stay informed and vigilant and closely monitor updates from RBI and the bank itself regarding the future course of action.

 

Customers should understand deposit insurance: Under the deposit insurance and credit guarantee corporation (DICGC) scheme, deposits up to Rs 5 lakh per depositor per bank are insured, so customers should take note of total balance to calculate how much loss they are facing.

 

Customers should open an account with another bank and diversify their savings by opening an account with a financially stable bank and redirect salary credits and payments there.

 

Secure immediate liquidity: Arrange alternative sources of funds, such as personal loans or credit lines, to manage cash flow disruptions.

 

Consult a financial advisor: Seek professional advice on safeguarding your investments and ensuring financial stability.

 

“The depositors need to keep a watch on the RBI move and steps to resolve the issue, such as merging the bank with another institution or allowing phased withdrawals in the future. Depositors should maintain all account statements, passbooks, and fixed deposit receipts for future reference. If the bank is revived, restrictions may be lifted,” said Mukesh Chand, senior counsel at Economic Laws Practice.