New India Co-op Bank customers can withdraw up to Rs 25,000 from Feb 27

RBI has barred the lender from issuing new loans and appointed an administrator

The Reserve Bank of India (RBI) has allowed depositors of the troubled New India Co-operative Bank to withdraw up to Rs 25,000 from their accounts from Thursday.

 

The regulator on February 13 barred the lender from issuing new loans, suspended deposit withdrawals for six months, and appointed an administrator, citing supervisory concerns and the lender's liquidity position.

 

"This move offers partial protection of savings and reassures public confidence in the banking system. However, depositors may note the withdrawal limit, and should stay updated on the bank’s financial status, and be aware of the Rs 5 lakh deposit insurance under DICGC," said Anant Singh Ubeja, senior associate, SKV Law Offices.

 

 

“The Reserve Bank, after reviewing the bank’s liquidity position in consultation with the administrator, has decided to allow a deposit withdrawal of up to Rs 25,000 per depositor, with effect from February 27, 2025. With the above relaxation more than 50 per cent of the total depositors will be able to withdraw their entire balances and the remaining depositors can draw up to Rs 25,000 from their deposit accounts,” said the RBI in a statement

 

“The depositors may use the branch as well as the ATM channel of the bank for this withdrawal, however, the aggregate amount that can be withdrawn will be Rs 25,000 per depositor or the balance available in their account whichever is lower.”

 

“The directive allowing depositors of the crisis-hit New India Co-operative Bank to withdraw up to Rs 25,000 offers temporary financial relief while underscoring the fragility of India's cooperative banking sector. This regulatory intervention is exercised under Section 35A of the Banking Regulation Act, 1949, which empowers the RBI to issue necessary directions in public interest to maintain banking discipline and depositor confidence,” said Kunal Sharma, partner at Singhania & Co (a law firm).

 

Amit Kumar Nag, partner at AQUILAW, explained when can depositors claim deposit insurance.

 

Depositors must claim their insurance within 45 days from the date of the direction of the Reserve Bank of India i.e. 30 March, 2025. The Deposit Insurance and Credit Guarantee Corporation (“DICGC”) will make the eligible claim payments to the eligible depositors as per Section 18A of the DICGC Act, 1961. The eligible depositor list has to be submitted by the bank within 45 days in such a manner as may be prescribed by the DICGC. After all claims are received, the DICGC will make the payment by 14 May, 2025.

 

Should investors put money in cooperative banks at all?

 

“The crisis has shaken confidence in cooperative banks, prompting depositors to shift funds to commercial banks, worsening liquidity issues for smaller institutions. Dealing with one’s hard-earned money should always be a cautious affair and though one should not avoid putting money in cooperative banks altogether, precautions must be taken. For making investments, the main things that have to be looked into are as to whether the bank is registered with the DICGC and whether such bank has been regularly following RBI guidelines and whether the RBI has ever flagged such bank for any misconduct or otherwise,” Nag said.