RBI Takes Action On New India Co-operative Bank in Mumbai, ban on withdrawals

The Reserve Bank of India last night banned Mumbai-based New India Co-operative Bank from disbursing new loans and taking deposits for six months. The Reserve Bank of India has said that this decision had to be taken to protect the depositors due to some recent developments in the bank. After this, on Friday morning, a large crowd of customers can be seen outside the bank's branch in Andheri, Mumbai. After the RBI decision, customers have rushed to withdraw the money deposited in their bank accounts.

Meanwhile on Thursday night, the Reserve Bank of India imposed several restrictions on the Mumbai-based New India Co-operative Bank. According to this restriction, bank customers will also not be able to withdraw money from their accounts. According to a PTI report, in view of the current state of the bank, the RBI has restricted the withdrawal of funds to the customers of New India Co-operative Bank as well. Worryingly, as per the order of RBI, these restrictions will be applicable on the bank for the next 6 months.

Meanwhile, the RBI has said that these instructions do not mean that the bank's banking license has been revoked. They will monitor their status and take action as needed.

What restrictions from RBI?

The RBI allows customers to repay loans through deposits subject to certain conditions. Apart from this, the bank will also be able to spend on some essential tasks like salaries of its employees, rent and electricity bills. As per RBI instructions, New India Co-operative Bank will not grant any loan or advance without prior approval from February 14. 

Apart from this, the bank will not accept any customer deposits or withdraw money from their accounts from today onwards. However, all eligible depositors of New India Co-operative Bank will be able to avail deposit insurance claim amount from Deposit Insurance and Credit Guarantee Corporation on their deposits up to INR 5 lakh.

The bank has been in losses for the past two years

New India Co-operative Bank has been loss-making for the past two financial years, with a loss of INR 227.8 million in the financial year ended March 2024 and INR 307.5 million in 2023, according to the bank's annual report.