RBI imposes 6-month withdrawal restrictions on New India Cooperative Bank

The Reserve Bank of India (RBI) has imposed various restrictions on the New India Cooperative Bank, which is continuously running at a loss. More than 90 percent of the 1.3 lakh depositors of this Mumbai-based bank have deposited up to Rs 5 lakh in their accounts. Most of the 28 branches of this cooperative bank are located in Mumbai metropolitan area. It also has two branches in Surat, Gujarat and one in Pune.

Following the instructions of the Reserve Bank, the ban on New India Cooperative Bank closing its business came into effect from February 13 and will remain in force for the next six months. According to a statement from the Reserve Bank, “Considering the bank's current cash position, no amount should be allowed to be withdrawn from any savings or current account or any other account of the depositors.”

The Reserve Bank of India has found some deficiencies in the accounts of New India Cooperative Bank. Last Friday, the Reserve Bank dissolved the bank's board for one year and appointed an administrator to manage the operation. A committee of advisors was also appointed to assist the administrator.

Following this, Mumbai police registered a case against the General Manager and Head of Accounts of New India Cooperative Bank and his associates for allegedly committing a fraud of Rs 122 crore.

Currently, the Mumbai court has extended the police custody of Hitesh Mehta, the main accused in the New India Cooperative Bank fraud case, till February 28. The court has also ordered the former Chief Executive Officer of the bank, Abhimanyu Bone, to be kept in police custody till February 28.

The Economic Offences Wing of the Mumbai Police is investigating the case. Mehta, the bank's general manager and head of accounts, is accused of embezzling Rs 122 crore from the bank's vault at various times.

As per the current rule, if a bank collapses, its customers get insurance up to Rs 5 lakh for the amount deposited. In such a situation, if this bank collapses, Rs 5 lakh of its customers will be safe. For the past few years, the Deposit Insurance and Credit Guarantee Corporation (DICGC) has been paying such claims.

This organization collects premium from banks for the 'cover' it provides, and most of the claims have been made in the case of cooperative banks. It is noteworthy that after the PMC Bank scam, the DICGC insurance limit was increased from Rs 1 lakh to Rs 5 lakh in 2020.