Mumbai: Thousands of anxious depositors of the New India Cooperative Bank, which was once controlled by the socialists, rushed to its branches in Ghatkopar and other places on Friday following the supersession of its board by the Reserve Bank of India for 12 months because of "poor governance standards." The supersession was done a day after imposing several restrictions on the bank.
The bank has been facing a severe crisis with losses in the last two fiscals. It posted a loss of Rs 31 cr in fiscal 2023 and Rs 23 cr in the FY ended March, 2024. The bank's advances reduced to Rs 1,175 cr as of March 31, 2024 from Rs 1,330 cr a year earlier.
The RBI informed the depositors that their deposits upto Rs 5 lakhs is insured with the Deposit Insurance and Credit GuaranteeCorporation (DICGC) and this will be paid within 90 days. In a statement, the RBI said it has appointed Shreekant, a former chief general manager of the State Bank of India, as ‘administrator’ to manage the affairs of the bank.
The central bank also appointed a ‘committee of advisors’ to assist the administrator in discharging his duties. The members of the committee are Ravindra Sapra (former general manager, SBI) and Abhijeet Deshmukh (chartered accountant).
Paresh Thakker of Ghatkopar said ``The insurance was only for deposits upto Rs 5 lakhs. What about amounts above that which people have deposited in the bank in good faith. The government should immediately intervene and secure the interest of the depositors." An activist Girish Ghela said "action should be taken against those responsible for bringing the bank to such a situation." The bank has 28 branches, mostlly in the Mumbai region.
Late on Thursday, the RBI directed the bank that it shall not, without prior written approval of the central bank, grant or renew any loans and advances, make any investment, incur any liability including borrowing of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in the discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except as notified by the RBI.
Considering the bank’s present liquidity position, the RBI directed it not to allow the withdrawal of any amount from savings bank or current accounts or any other account of a depositor but allowed it to set off loans against deposits subject to RBI conditions.
The bank can incur expenditure in respect of certain essential items such as salaries of employees, rent, electricity bills – but only as specified by the RBI.
The eligible depositors would be entitled to receive deposit insurance claim amount of their deposits up to a monetary ceiling of Rs 5 lakh in the same capacity and in the same right, from the Deposit Insurance and Credit Guarantee Corporation (DICGC), as applicable under the provisions of the DICGC Act, 1961, based on submission of willingness by the depositors concerned and after due verification.
The depositors have been advised to contact bank officials for further information and details can be accessed on the DICGC website.
“The issue of the above Directions by the RBI should not per se be construed as cancellation of banking license by RBI. The bank will continue to undertake banking business subject to restrictions specified in the said Directions till its financial position improves. The RBI continues to monitor the position of the bank and will take necessary actions including modifications of these Directions, as warranted, depending upon circumstances and in the interest of the depositors,” the RBI said in its Thursday order.
These directions against New India Co-operative Bank Limited, Mumbai is set to remain in force for a period of six months from the close of business on February 13, 2025 and are subject to review.
During the past four decades of its operations, the Bank has established 30 branches, which are located in Mumbai, Thane, Surat and Pune, according to its website. The bank achieved a “scheduled bank” status on November 1, 1990. The bank achieved a "multi-state status" on October 22, 1999.
Meanwhile, the Mumbai Grahak Panchayat (MGP), a prominent organisation of consumers, has taken up the cause of the bank depositors. President of the MGP Shirish Deshpande has in a letter to RBI governor Sanjay Malhotra said it was a matter of concern that the RBI circular has ruled that “no amount (whether from savings, current recurring deposit or any other deposit account by whatever name called), may be allowed to be withdrawn by a depositor.”
The circular also says that these directions shall remain in force for six months. Deshpande said these directions were very "harsh" on innocent depositors and would cause immense hardship specially to senior citizens and pensioners who have accounts with the bank. He noted that under section 35A(2) of the RBI Act enables RBI, on the representation or suo moto, to modify or cancel these directions issued under section 35A.
The MGP has sought a meeting with Malhotra with a view to have the harsh directives of the apex bank modified in the interest of depositors. (with inputs from agencies)
