The Reserve Bank of India (RBI) has 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. The decision comes amid concerns over the bank’s financial health.

What exactly has the RBI announced?

The RBI has directed that, effective February 13, 2025, the bank:

• Cannot grant or renew loans and advances

Why has the RBI taken this step?

The central bank cited "recent material developments" at New India Co-operative Bank, suggesting that its financial health has deteriorated. While specific reasons were not disclosed, the move is aimed at protecting depositors' interests and preventing a potential crisis.

Is New India Co-operative Bank in financial trouble?

Yes, the bank has been facing financial difficulties for the past few years:

• It reported a loss of ₹227.8 million in the financial year ending March 2024.

Does this mean the bank’s licence is cancelled?

No. The RBI has not cancelled the bank’s licence, meaning it can still function under restrictions. However, the RBI will continue to monitor its financial condition and may take further action if required.

What happens to existing depositors?

Depositors cannot withdraw money unless the RBI grants special permission. However, their funds remain in the bank. If the bank stabilises, restrictions may be lifted after six months.

Customer of the bank should know that the Deposit Insurance and Credit Guarantee Corporation (DICGC) insures deposits at New India Cooperative Bank Limited up to Rs 5 lakh per depositor. This insurance covers both principal and interest.

How does DICGC insurance work?

Your deposits are insured up to a specified limit by the DICGC, even if the bank fails. This coverage includes all deposit types, such as savings, fixed, current, and recurring deposit accounts. Eligible depositors must provide proof of claim and complete a verification process to receive their insured funds.

Has the RBI taken similar actions before?

Yes. The RBI has previously imposed similar restrictions on struggling co-operative banks facing liquidity issues or rising non-performing assets (NPAs). In many cases, banks were later merged with stronger institutions or placed under financial restructuring plans.

What should depositors do now?

Depositors are advised to:

• Stay updated with RBI announcements.

The RBI’s decision highlights the need for stronger financial management in co-operative banks and serves as a warning for similar institutions facing liquidity issues.