New India Co-operative Bank fraud case: How will the RBI crackdown impact account holders, depositers?

New India Co-operative Bank fraud: In its instructions against the bank, the RBI said,”It is hereby notified for information of the public that the 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.”

According to RBI’s order, account holders cannot make any investment, incur any liability, including borrower 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 RBI, however, gave relaxation to the New India Co-operative Bank in respect of certain essential items such as salaries of employees, rent, electricity bills, etc. “These directions are necessitated due to supervisory concerns emanating from the recent material developments in the bank and to protect the interest of depositors,” said the central bank in its notice.

The central bank, in its notice, further directed that depositors would be entitled to receive deposit insurance claim amount of their deposits up to a monetary ceiling of ₹5,00,000 in the same capacity and the same right from the Deposit Insurance and Credit Guarantee Corporation (DICGC). RBI said that these directions should not be taken as the cancellation of the banking licence.

“The bank will continue to undertake banking business subject to restrictions specified in the said Directions till its financial position improves. The RBI continues to monitor the bank’s position and will take necessary actions, including modifications of Directions, as warranted, depending upon circumstances and in the interest of the depositors,” it said. The RBI added that the directions on the bank will remain in force for six months from the close of business on February 13, and the bank’s activities will be reviewed.