New India Co-op Bank crisis: Higher returns come with greater risk

Many cooperative banks fall prey to political interference, unreliable accounting practices, loan evergreening, and frauds

The Reserve Bank of India (RBI) recently imposed restrictions on Mumbai-headquartered New India Cooperative Bank, barring withdrawals from all accounts without prior approval.

 

The bank was also prohibited from issuing new loans, making investments, disbursing payments, or accepting fresh deposits, except under specific conditions. During inspection, ₹122 crore cash was found missing from two of the bank’s branches.

 

Why these banks fail

 

Cooperative banks such as Madhavpura Mercantile Cooperative Bank (2012), Punjab and Maharashtra Cooperative Bank (2019), and several others have failed in the past. Experts attribute these failures to poor management. “Many cooperative banks have bad management and poor