Poor governance: RBI replaces New India Co-op Bank's board for 12 months

Customers queued outside New India Cooperative Bank's branches in Mumbai on Friday seeking answers on the abrupt shut down of certain key services

A day after imposing restrictions on Mumbai-based New India Co-operative Bank, the Reserve Bank of India (RBI) has superseded its Board of Directors for 12 months, citing poor governance standards, the central bank said in a statement on Friday.

 

“In exercise of the powers conferred under Section 36 AAA read with section 56 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies), the Reserve Bank has today superseded the Board of Directors of New India Cooperative Bank Ltd, Mumbai, for a period of 12 months,” the statement issued by the RBI read.

 

RBI appoints ex-SBI manager to head bank

The RBI appointed Shreekant, a former chief general manager of the State Bank of India (SBI), as the administrator to manage the bank’s affairs. Additionally, a committee of advisors has been formed to assist him, comprising Ravindra Sapra (former general manager, SBI) and Abhijeet Deshmukh (chartered accountant).

 

 

RBI imposes curbs on New India Co-op Bank

The move follows sweeping restrictions imposed on the bank on Thursday, including a six-month freeze on withdrawals due to liquidity concerns. Depositors cannot access their savings, current, or other accounts, though the bank has been allowed to set off loans against deposits and cover essential expenses such as employee salaries, rent, and utility bills.

 

The RBI stated that the bank cannot grant or renew loans, make new investments, or accept fresh deposits without prior approval. It assured depositors that those eligible could claim up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). 

Why RBI stopped New India Co-operative Bank's operations

 

Customers queue outside New India Co-op Bank

With 28 branches, primarily in Mumbai, the bank’s sudden restrictions have sparked panic among customers, many of whom depend on their accounts for daily expenses, bill payments, and loan EMIs. 

Customers panic as RBI bans withdrawals from New India Co-operative Bank

 

The situation is reminiscent of the 2019 Punjab and Maharashtra Co-operative Bank (PMC) crisis, where financial irregularities led to business curbs and an eventual takeover by Centrum Financial Services. The RBI’s latest intervention aims to stabilise the bank while ensuring depositor interests are protected.