RBI's regulatory crackdown: Mumbai-based New India Co-op Bank Board superseded for 12 months

The Reserve Bank of India (RBI) on Friday superseded the Board of Directors of New India Cooperative Bank Ltd. for a period of 12 months, a day after imposing several restrictions on the Mumbai-based bank.

The central bank has appointed Shreekant, former Chief General Manager of the State Bank of India (SBI), as the administrator to manage the bank’s affairs during this period. A committee of advisors comprising Ravindra Sapra, former General Manager of SBI, and Abhijeet Deshmukh, a chartered accountant has also been constituted to assist the administrator.

“The above action is necessitated due to certain material concerns emanating from poor governance standards observed in the bank,” the RBI said in a statement.

The action follows supervisory concerns flagged by the RBI, which, on February 13, imposed certain restrictions on the bank under Section 35A of the Banking Regulation Act, 1949.

Under these restrictions, the bank cannot, without prior RBI approval, grant or renew loans, make fresh investments, incur liabilities, disburse payments, or sell its assets.

Given the bank’s liquidity situation, depositors are currently not allowed to withdraw funds from their accounts, though they may set off loans against deposits under specified conditions, the RBI said.

The RBI clarified that these restrictions do not imply the cancellation of the bank’s license, and it will continue to operate within the imposed constraints until its financial position improves. The regulator will review the restrictions after six months.

Eligible depositors will be entitled to receive deposit insurance of up to ₹5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC), subject to verification, the statement added.

The RBI assured that it will continue to monitor the bank’s position and take necessary steps in the interest of depositors.