The Reserve Bank of India (RBI) has superseded the board of directors of New India Cooperative Bank for a period of 12 months. This move comes after the RBI imposed severe restrictions on the bank, barring it from accepting new deposits, offering loans, or making investments. Former State Bank of India (SBI) Chief General Manager (CGM) Shreekant has been appointed as the administrator of the bank. Additionally, a ‘Committee of Advisors’ has been formed to assist the administrator. The committee comprises former SBI General Manager Ravindra Sapra and Chartered Accountant […]
New India Cooperative Bank
The Reserve Bank of India (RBI) has superseded the board of directors of New India Cooperative Bank for a period of 12 months. This move comes after the RBI imposed severe restrictions on the bank, barring it from accepting new deposits, offering loans, or making investments. Former State Bank of India (SBI) Chief General Manager (CGM) Shreekant has been appointed as the administrator of the bank. Additionally, a ‘Committee of Advisors’ has been formed to assist the administrator. The committee comprises former SBI General Manager Ravindra Sapra and Chartered Accountant Abhijeet Deshmukh.
The RBI’s decision to intervene followed an earlier order restricting the bank’s ability to conduct transactions. Customers were also barred from withdrawing their deposits. In response, the RBI assured eligible depositors that they could claim up to ₹5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI. This announcement led to panic, as depositors rushed to the bank’s Mumbai branches, forming long queues to withdraw their money.
The RBI’s action stems from concerns over the bank’s financial stability. The central bank cited supervisory issues and liquidity problems as the reasons for the restrictions. New India Cooperative Bank was also prohibited from issuing new loans, making investments, and borrowing funds. These measures will remain in effect for six months, although they are subject to review.
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Despite the severe restrictions, the RBI allowed the bank to settle loans against existing deposits under specific conditions. The bank is also permitted to meet essential operational expenses, such as paying employee salaries, rent, and utility bills. This ensures that the bank can continue its minimal operations during this difficult period.
The restrictions have caused widespread concern among the bank’s customers, especially as they were not initially given a clear explanation for the RBI’s actions. Many customers, unsure of the future, attempted to withdraw their funds. Videos showing large crowds outside the bank’s branches quickly went viral, fueling further panic.
The RBI’s crackdown on New India Cooperative Bank is part of a broader trend of regulatory actions targeting smaller financial institutions facing compliance and liquidity issues. The bank’s situation will be closely monitored in the coming months. Its future remains uncertain as it deals with the fallout from the RBI’s intervention.
In summary, the RBI’s takeover of New India Cooperative Bank reflects growing concerns over the financial health of smaller banks. The restrictions, aimed at stabilizing the bank, have caused significant anxiety among depositors. The coming months will reveal whether the intervention will help restore the bank’s stability or if further actions will be needed.
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