Easing of restrictions on New India Co-operative Bank

Overview

With effect from February 27, 2025, the Reserve Bank of India has loosened restrictions on New India Co-operative Bank, permitting withdrawals of up to Rs 25,000. This comes after the bank’s liquidity status has been evaluated. The general manager of the bank was also taken into custody on suspicion of embezzling Rs 122 crore.

Depositors can withdraw

Starting February 27, the Reserve Bank of India (RBI) has permitted ₹25,000 withdrawals to depositors of the fraud-plagued New India Cooperative Bank, providing some respite. More than half of all depositors would be able to withdraw their full balances with the aforesaid relaxation, and the remainder depositors will be allowed to withdraw up to ₹25,000 from their accounts, according to the RBI.

Depositors can make this withdrawal using the bank’s ATM channel or in-branch. It was explained, however, that the total amount that any depositor may withdraw will be ₹25,000 or the amount that is available in their account, whichever is less.

With effect from February 25, the RBI has also reorganized the Committee of Advisors (CoA) to the Administrator. CoA members include former State Bank of India general manager Ravindra Sapra, former Saraswat Co-operative Bank Ltd. deputy general manager Ravindra Tukaram Chavan, and chartered accountant Shri Anand M. Golas. However, the Administrator has not changed.

RBI had issued AID

As a precautionary step to safeguard depositors’ interests, the RBI issued All Inclusive Directions (AID) to the bank on February 13, 2025, prohibiting any withdrawals from current, savings, and other accounts. The central bank then replaced its Board on February 14, 2025, and established an Administrator and a Committee of Advisors (CoA) to supervise the situation and guarantee the stability of the bank.

The RBI was developing a proposal to permit extraordinary withdrawals for personal and medical situations for depositors of the financially troubled New India Co-operative Bank. In the event of a bank failure, savings up to Rs 500,000 are guaranteed under present regulations, and payouts must be given within 90 days. A request for comment was not immediately answered by the RBI.

Citing worries about the bank’s financial condition and ongoing supervisory challenges, the RBI placed severe limitations on the bank last week, forbidding it from issuing new loans, suspending deposit withdrawals for six months, and designating an administrator.

Story so far

On February 17, Hitesh Mehta, the bank’s general manager and head of accounts, was taken into custody on suspicion of embezzling Rs 122 crore. Mehta admitted to giving a real estate developer Rs 70 crore to finance an SRA (Slum Rehabilitation Authority) project in Charkop, Kandivali, according to a police official.

Mehta and developer Dharmesh Paun were detained in connection with the investigation and placed under police prison until February 1, 2025.  The bank’s interim CEO, Devarshi Ghosh, filed the case at the Dadar police station on Friday. The Mumbai police’s Economic Offences Wing (EOW) took over the case after the complaint was filed, and it is currently investigating the alleged theft at the bank’s Prabhadevi and Goregaon branches.

Conclusion

Thus, the RBI is supporting the New India Co-operative Bank and its depositors by easing restrictions. The checking of the bank’s liquidity position has yielded positive results. This increased facility has given relief to depositors as above 50% of them are able to access all of their funds while some of them are permitted to withdraw Rs 25,000. Steps have also been taken to restructure the bank by changing the Committee of Advisors and placing the administrator under active oversight. This comes after the recent arrest of the bank’s general manager, Hitesh Mehta, for suspected embezzlement of funds to the tune of 122 crore rupees, thus exposing shocking levels of corruption and internal inquiry into the financial mismanagement. Despite challenges, the RBI aims to balance the interests of the depositors and restore order to the meandering waters of financial chaos still looming around the bank.