In a significant move to alleviate the financial distress of depositors, the Reserve Bank of India (RBI) has permitted account holders of the beleaguered New India Co-operative Bank to withdraw up to ₹25,000 from their accounts, effective February 27, 2025. This decision comes in the wake of stringent restrictions imposed earlier this month due to the bank’s financial irregularities and liquidity concerns.
Background: Imposition of Restrictions
On February 13, 2025, the RBI imposed an All-Inclusive Directions (AID) on New India Co-operative Bank, citing “supervisory concerns” and the bank’s precarious liquidity position. These directives halted all deposit withdrawals and barred the bank from issuing new loans for a period of six months. The following day, the central bank superseded the bank’s board and appointed Shreekant, a former Chief General Manager of the State Bank of India, as the administrator to oversee the bank’s operations. A Committee of Advisors was also constituted to assist in managing the bank’s affairs.
Withdrawal Relaxation: Details and Implications
After a thorough assessment of the bank’s liquidity in consultation with the appointed administrator, the RBI announced on February 24, 2025, that depositors would be allowed to withdraw up to ₹25,000 per account starting February 27. This measure is expected to provide substantial relief, enabling more than 50% of the bank’s depositors to access their entire account balances. For the remaining customers, withdrawals will be capped at ₹25,000 or the available account balance, whichever is lower. Depositors can utilize both branch and ATM channels to execute these withdrawals.
Financial Health of the Bank
As of March 31, 2024, New India Co-operative Bank reported outstanding deposits totaling ₹2,436.4 crore and advances amounting to ₹1,174 crore. The bank has been grappling with financial instability, recording losses of ₹22.78 crore in the 2023-24 fiscal year and ₹30.75 crore in the previous year. Additionally, the bank’s capital adequacy ratio stood at 9.1% in FY24, below the regulatory requirement of 10%, marking the second consecutive year of non-compliance.
Allegations of Embezzlement
Compounding the bank’s woes, allegations of fund misappropriation have surfaced. Hitesh Mehta, the bank’s General Manager and Head of Accounts, was arrested on February 17 for allegedly embezzling ₹122 crore. Investigations revealed that Mehta purportedly diverted ₹70 crore to a real estate developer for a Slum Rehabilitation Authority project in Mumbai’s Kandivali area. These revelations have further eroded depositor confidence and intensified scrutiny of the bank’s internal controls.
Regulatory Oversight and Future Prospects
The RBI has reconstituted the Committee of Advisors to the administrator, effective February 25, 2025. The committee now includes Ravindra Sapra, former General Manager of the State Bank of India; Ravindra Tukaram Chavan, former Deputy Chief General Manager of Saraswat Co-operative Bank Ltd; and Anand M. Golas, a Chartered Accountant. The central bank has affirmed its commitment to closely monitor developments and take necessary actions to safeguard depositor interests.
While the current relaxation offers immediate relief to many depositors, the long-term resolution of the bank’s financial troubles remains uncertain. The RBI’s intervention aims to stabilize the situation, but depositors and stakeholders are keenly awaiting further developments regarding the bank’s restructuring or potential merger to ensure the security of their funds.
Shashi Kant is the Founder and Editor of BusinessScroller.com, a leading platform for business insights, finance trends, and industry analysis. With a passion for journalism and expertise in business reporting, he curates well-researched content on market strategies, startups, and corporate success stories. His vision is to provide valuable information that empowers entrepreneurs and professionals. Under his leadership, BusinessScroller.com has grown into a trusted source for in-depth articles, customer care guides, and financial expertise.
