Amid crackdown on New India Co-op Bank, RBI governor urges UCBs to uphold trust and resilience

Days after the Reserve Bank of India imposed restrictions on New India Co-operative Bank, RBI Governor Sanjay Malhotra met with the Chairmen, Managing Directors, and CEOs of select Urban Cooperative Banks (UCBs) across all tiers nationwide.

He acknowledged the important role of Urban Cooperative Banks in serving the people at the grassroots level and deepening financial inclusion. The Governor said the Reserve Bank will continue to support the sector in its growth ambitions but emphasised that UCBs also "need to be mindful of their responsibilities", particularly in view of the trust reposed on them by the depositors.

The central bank on February 14 had imposed strict restrictions on Mumbai-based New India Co-operative Bank Limited, preventing it from issuing new loans, accepting fresh deposits, or allowing withdrawals for the next six months, amid concerns over the bank’s financial health. The central bank cited "recent material developments" at New India Co-operative Bank, which suggested that its financial health has deteriorated. While specific reasons were not disclosed, the move was aimed at protecting depositors' interests and preventing a potential crisis.

To enhance the financial soundness and resilience of UCBs, the RBI on February 24 had also announced key revisions to existing prudential norms. The revised guidelines provide greater operational flexibility while maintaining regulatory discipline across small-value loans, real estate exposure, and provisioning requirements for Security Receipts (SRs).

Meanwhile today, the RBI Governor stressed the importance of maintaining high standards of customer service to build and retain trust. UCBs were also advised to ensure that they remain operationally resilient including against IT and cyber-related risks. The participants shared their feedback and gave various suggestions during the interactive session of the meeting.

The representatives from industry bodies viz., National Urban Cooperative Finance and Development Corporation Limited (NUCFDC) and National Federation of Urban Cooperative Banks & Credit Societies Limited (NAFCUB) also participated in the meeting.

The meeting was a part of the Reserve Bank's series of engagements with its regulated entities. The meeting was also attended by Deputy Governors, M. Rajeshwar Rao and Swaminathan J., along with Executive Directors-in-Charge of Regulation and Supervision.