RBI Takes Charge: New India Co-operative Bank's Board Dismissed Amid Crisis
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Synopsis
On February 14, the Reserve Bank of India (RBI) removed the board of directors of the New India Co-operative Bank for 12 months due to financial difficulties. New loans and deposits are halted, but depositors can claim insurance on eligible amounts.
Key Takeaways
- RBI intervenes by superseding the bank's board.
- Restrictions imposed on new loans and deposits.
- Shreekant appointed as bank's Administrator.
- Depositors can claim insurance up to Rs 5 lakh.
- Bank faces ongoing financial challenges.
Mumbai, Feb 14 (NationPress) The Reserve Bank of India (RBI) has taken decisive measures against the New India Co-operative Bank by dissolving its board of directors for a duration of 12 months, commencing from February 14.
This action follows the RBI's imposition of multiple restrictions on the bank, including a ban on issuing new loans and accepting fresh deposits for six months.
Furthermore, the RBI has appointed Shreekant, the former Chief General Manager of the State Bank of India (SBI), as the Administrator to manage the bank's operations during this period.
A Committee of Advisors has also been established to assist him, comprising Ravindra Sapra, a former General Manager of SBI, and Abhijeet Deshmukh, a Chartered Accountant.
The imposed restrictions have raised alarms among customers, as since February 13, depositors have been barred from accessing their savings, current, or any other accounts for six months.
Nonetheless, the RBI has assured that customers with qualifying deposits can claim insurance up to Rs 5 lakh through the Deposit Insurance and Credit Guarantee Corporation (DICGC).
In addition to the halt on new loans and deposits, the RBI has prohibited the bank from making investments or incurring new liabilities without prior consent.
However, the bank is permitted to utilize funds for essential payments, such as employee salaries and utility bills.
The RBI’s intervention was prompted by worries over the bank’s recent financial troubles, and the central bank emphasized that these actions are designed to protect the interests of the bank's depositors.
Meanwhile, the bank has been grappling with financial issues for the past two years, including reporting a loss of Rs 23 crore in the financial year 2023-24.
Although the bank's advances fell to Rs 1,175 crore from Rs 1,330 crore the preceding year, its deposits saw a slight rise to Rs 2,436 crore from Rs 2,406 crore.
In spite of these hurdles, the RBI has clarified that the bank's license remains intact, and it will keep a close watch on the situation.
