RBI Halts Key Operations of New India Co-operative Bank, Supersedes Board—Here’s Why

The Reserve Bank of India (RBI) on Friday superseded the Board of Directors of the New India Co-operative Bank for 12 months. It has also appointed Shreekant, former chief general manager (CGM) of SBI, as the Administrator to manage the bank’s affairs during the period.

“The Reserve Bank has today superseded the Board of Directors of New India Cooperative Bank Ltd., Mumbai, for a period of 12 months. Consequently, the Reserve Bank has appointed Shri Shreekant, former Chief General Manager of State Bank of India (SBI) as ‘Administrator’ to manage the affairs of the bank during this period," the bank said in a release.

It also appointed a ‘Committee of Advisors’ consisting of Ravindra Sapra, former general manager of SBI and a chartered accountant Abhijeet Deshmukh to assist the Administrator in discharging his duties.

Why RBI Imposed Restrictions?

According to the banking regulator, the action was required due to certain concerns emanating from poor governance standards observed in the bank.

It came after the central bank had restricted the bank from issuing new loans, accepting fresh deposits, or allowing withdrawals for the next six months. The decision was taken in the wake of concerns over the bank's financial health and liquidity.

"It is hereby notified for information of the public that... the Reserve Bank of India (RBI) ... has issued certain Directions to New India Co-operative Bank Limited, Mumbai (“the bank”), whereby, as from the close of business on February 13, 2025, the bank shall not, without prior approval of RBI in writing, grant or renew any loans and advances, make any investment, incur any liability including borrowal 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 in the RBI Direction dated February 13," the central bank's statement read.

However, the notice stated that the bank is allowed to set off loans against deposits subject to the conditions stated in the directions.

"Considering the bank's present liquidity position, the bank has been directed not to allow withdrawal of any amount from savings bank or current accounts or any other account of a depositor but is allowed to set off loans against deposits subject to the conditions stated in the above RBI Directions," the notice read.

It was also specified that the notice should not be seen as a suspension of a banking license by the regulator and the bank will continue its business subject to restrictions specified.

The New India Co-operative Bank's financial struggles have been visible in recent years. The bank's annual report revealed that it registered a loss of Rs 227.8mn in FY24, following a bigger loss of Rs 307.5mn in the previous fiscal. Its loan book also slumped to Rs 11.75bn in FY24 down from Rs 13.30bn a year earlier.