The Reserve Bank of India (RBI) has superseded the Board of Directors of New India Co-operative Bank for 12 months, citing poor governance standards.

The move comes a day after imposing restrictions on Mumbai-based Co-operative Bank.

Advertisement

“In exercise of the powers conferred under Section 36 AAA read with section 56 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies), the Reserve Bank has today superseded the Board of Directors of New India Cooperative Bank Ltd, Mumbai, for a period of 12 months,” the RBI said in a statement.

Furthermore, the RBI has appointed Shreekant, a former chief general manager of the State Bank of India (SBI), as the administrator to manage the bank’s affairs.

A committee of advisers, comprising Ravindra Sapra (former general manager, SBI) and Abhijeet Deshmukh (chartered accountant), has been formed to assist Shreekant.

The RBI had levied restrictions on the bank that included a six-month freeze on withdrawals due to liquidity concerns. Depositors cannot access their savings, current, or other accounts, though the bank has been allowed to set off loans against deposits and cover essential expenses such as employee salaries, rent, and utility bills.

It said the bank cannot grant or renew loans, make new investments, or accept fresh deposits without prior approval. It assured depositors that those eligible could claim up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

A significant distress was caused among depositors, many of whom rely on their bank accounts for daily financial needs.

Customers were seen rushing to branches in a panic, worried about their savings, bill payments, and loan EMIs.

The RBI had stated that the eligible depositors would be entitled to receive deposit insurance claim amount for their deposits, up to a monetary ceiling of ₹5,00,000/- (Rs 5 lakh only), 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 the submission of willingness by the depositors concerned and after due verification.

However, the RBI had clarified that the issue of the Directions should not per se be construed as cancellation of banking licence by the RBI.

“The bank will continue to undertake banking business subject to restrictions specified in the said Directions till its financial position improves,” the central bank said.