[Ripcord09]

Deposit holders of New India Co-operative Bank cannot withdraw money from their bank accounts with effect from February 13, 2025, after the RBI issued directions in this regard. The RBI has completely restricted the withdrawal of funds due to the present deteriorating liquidity position of the bank. The central bank has not specified the time for lifting the restriction in its current directive. Restrictions may continue for six months as per the current directive or until the next communication by the RBI.

RBI said on February 13, 2025: “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 bank may incur expenditure in respect of certain essential items such as salaries of employees, rent, electricity bills, etc., as specified in the said Directions.”

Restriction on withdrawals of deposit from New India Co-operative Bank are not permanent. The press release by the RBI has mentioned that this restrictive direction is in force for a period of six months from February 13, 2025, which is August 13, 2025.

The RBI said: “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 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.”

“These directions are necessitated due to supervisory concerns emanating from the recent material developments in the bank, and to protect the interest of depositors of the bank. These Directions shall remain in force for a period of six months from the close of business on February 13, 2025, and are subject to review.”

Remembering PMC’s downfall

This is the first major action against a co-operative bank in Maharashtra after the collapse of Punjab and Maharashtra Co-operative (PMC) Bank due to large scale fraudulent loans.

Here’s a link to the discussion on the PMC’s bank’s collapse — (Disscussion Link).

What can deposit holders do?

The RBI said: “The eligible depositors would be entitled to receive deposit insurance claim amount of their deposits up to a monetary ceiling of Rs 5,00,000 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 submission of willingness by the depositors concerned and after due verification.”

Supersession of Board of Directors of New India Cooperative Bank

RBI said on February 14, 2025: "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. 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 Reserve Bank has also appointed a ‘Committee of Advisors’ to assist the Administrator in discharging his duties."

What does this direction mean for deposit holders of New India Co-operative Bank?

This direction is the first step of the entire process. It does not mean the bank has gone bankrupt or liquidated, or has lost its banking license. It only means a stop has been put on its business pending further inquiry. The inquiry’s result will tell what is the future course of action for this bank—moratorium, liquidation, or amalgamation.

Will you continue to trust such Non-Scheduled Banks? Where will you park your money for long-term investment?

Source

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[V.Narayan]

Glad to see some interesting and unusual new threads by you in recent 2 months from the DC mid-air plane collision to Railway privatization to gold to this. Great work.

With regard to your pertinent question on why customers and depositors patronize such banks. Small businesses patronize them due to simpler or more lax compliance. There is a "convenience" factor they value. Then there are the members of some community - professional, religious, geographical, occupational who set up the co-operative bank to provide small figure low fuss credit that bigger scheduled banks don't. And finally there are local small depositors of limited means that are attracted by higher interest rates which mean a lot to them with their limited financial resources. These three categories, especially the latter two cannot understand the complexities of the functioning of a bank and attendant risks and unfortunately suffer.

Banks don't go belly up over night. The fragility in their balance sheets is visible a few to several years in advance. RBI has to also answer as to what steps did it as the regulator take to protect the small depositor.

[GTO]

Unlike the other scam banks (PMC & Yes), this was a different kind of theft. In fact, it was as oldschool as the style can get. The managers & employees stole hard cash from the bank vault

My big money is only parked with large PSU banks (SBI and the like). No one ever lost money keeping it parked in a BOI or SBI.

[hothatchaway]

From what I could gather, the trigger has been charges of embezzlement against an employee to the tune of 122 crores. It is unclear if the overall exposure of the bank is beyond this. The overall deposit mobilization of the cooperative bank is around 2400 crores. That along with the deposit insurance scheme should hopefully protect the bank's depositers. Of course, there is no compensation for the inconvenience and anxiety of those with their savings stuck.

While such cooperative banks are in the news for the wrong reasons, they exist because they serve people who the big PSU banks won't touch. Also, corruption is not limited to these small institutions alone, do remember that the chief of one of India's largest private sector bank and among the too big to fail was under investigation not too long back. She and her husband were under the scanner for how money was lent in violation of norms. She had to eventually exit in disgrace.

[deathwalkr]

The number of scams associated with co-operative banks in Kerala is alarming. General consensus is that funds in such banks are treated as a no-questions-asked piggy bank by political members.

People have killed themselves because they were unable to withdraw money in their account!

Sad state of affairs.

[GTO]

Originally Posted by hothatchaway

That along with the deposit insurance scheme should hopefully protect the bank's depositers.

I believe the cap for this is 5-lakhs?

While such cooperative banks are in the news for the wrong reasons, they exist because they serve people who the big PSU banks won't touch

I feel the PSU banks do a great job of reaching far & beyond areas (including rural areas which no one else touches). And at least from what I saw in Bombay, customers of this New India Co-Op bank could easily have been serviced by PSU banks or the big non-PSUs like HDFC & ICICI.

do remember that the chief of one of India's largest private sector bank and among the too big to fail was under investigation not too long back

Absolutely. But not once were there any restrictions on withdrawals of the common man for accounts held with ICICI Bank, due to the Chanda Kochhar scam. Of course, it was a different matter with Yes Bank.

Which is why I personally trust only the big PSU banks blindly, and HDFC / ICICI to a large extent (but not as much as an SBI or BOI). Of all, I love SBI. Even for car loans, there are such good reviews from BHPians.

[Fuldagap]

During the so called demonetisation, co-operative banks were at the helm for exchanging notes and money laundering. People in the know and links were able to deposit cash limitlessly, unlike a normal guy who went to say SBI or ICICI. Who reads RBI circulars or knows where to read them? An average joe just trust the banks and the process.

A particular politician and leader was at the helm to use his own such bank for his own means, deploying even military aircrafts to transport cash trunks while himself being the chanakya behind it. Who knows exactly how much black was converted into white.

Why would 'customers' not use such banks. Only the naive and gullible lose money. Banks are a privilege for the privileged.

[SmartCat]

Originally Posted by hothatchaway

That along with the deposit insurance scheme should hopefully protect the bank's depositers.

Originally Posted by GTO

I believe the cap for this is 5-lakhs?

Problem is that 'small' investors put their life savings into such banks and many are retirees. So invested amount will be significant multiples of that Rs. 5 Lakhs limit.

Also, depositors insurance is not paid out immediately. DICGC paid PMC Bank depositors 3 years after the collapse.

[Fx14]

Originally Posted by Ripcord09

Will you continue to trust such Non-Scheduled Banks?

In this case, it was a Scheduled Bank. You can zoom in on the name board / banner in the last photo of your OP for confirmation.

As facts are slowly being revealed in the media, there's integrity issues of the staff (can't be just one or two) at the core of this downfall. Whether Scheduled Bank or not would not at all matter. The recent past have instances of big Private Banks too, where staff integrity issues caused problems.

What's alarming is that the matter was not detected by the Bank's own internal Audit team and corrective action taken, OR it was known and not tackled - which reflects the involvement of multiple staff at very senior levels.

Contrary to what most people think, a Co-operative Bank is subject to external audit by both - RBI and Registrar of Co-operative Societies. So, more scrutiny levels than just commercial banks.

The media reports that the matter apparently was detected during a surprise RBI audit simultaneously carried out at the HO and a specific branch of the Bank. So, the regulator probably got a tip-off of the ongoing and stepped in to avoid the rot getting out of hand (if it hasn't already).

TAKEAWAY - Deposit less than the DICGC threshold in a specific Bank and maintain accounts across a few different Banks, so as to avoid liquidity issues.

[Fuldagap]

Originally Posted by Fx14

In this case, it was a Scheduled Bank. You can zoom in on the name board / banner in the last photo of your OP for confirmation.

It was indeed a scheduled commercial bank. However, with so many defaults, NPAs, scams going on since so many years in so many top banks, this fiasco is feeble (just about INR 100 crores). In bigger banks such amount of scams are a lot that may or may not be still under a central agency's investigation.

Anyone remember the very brilliant and ingenious PNB scam in which the core banking was bypassed making a once in a lifetime event? It was estimated to be worth INR 14k crores.

And the 1st photo is from a branch at Kaspate Vasti, Wakad. I believe I have seen it many years back.

Originally Posted by Fx14

Contrary to what most people think, a Co-operative Bank is subject to external audit by both - RBI and Registrar of Co-operative Societies. So, more scrutiny levels than just commercial banks.

True but still processes, checks and balances fail even when it comes to banks deemed to be too big to fail. Banking has always been and will probably always be done through humans involved with discretionary delegation of powers which get misused every now and then the world over.

[V.Narayan]

Originally Posted by GTO

And at least from what I saw in Bombay, customers of this New India Co-Op bank could easily have been serviced by PSU banks or the big non-PSUs like HDFC & ICICI.

I cannot speak for large cities like Mumbai but in Tier 3, Tier 4 towns these co-operative banks are popular because they give micro and mini credit to those in the primary sector of the economy and who may not have the assets to mortgage to an adequate extent. So they have played an important role in agriculture, animal husbandry etc Also they are popular amongst the very small entrepreneur running a trade of say 2 taxis, or one truck. Dealing with them is less intimidating for semi-rural and rural folks. But they are at times within the sphere of some local politician family and that's more of a liability than an asset.

Originally Posted by Fuldagap

A particular politician and leader was at the helm to use his own such bank for his own means, deploying even military aircrafts to transport cash trunks while himself being the chanakya behind it. Who knows exactly how much black was converted into white.

Can you share the relevant news clipping. I would be keen to know the facts. The military are not answerable to any politician other than the Defence Minister, the Prime Minister and the President. So I am wondering how some Chief Minister or even Cabinet Minister could order them around to requisition a military transport aircraft to move trunk fulls of cash. Please help me as I'm struggling to put my head around this one.

Originally Posted by Fuldagap

Banks are a privilege for the privileged.

In India thanks to the yeoman work done by PSU banks since 1969 banking is available in every corner of the country. This is supplemented by the Co-operative Banks being discussed on this thread. In India of today we really cannot say that Banking is for the privileged only. Let's simply agree to disagree.

[hothatchaway]

Originally Posted by V.Narayan

I cannot speak for large cities like Mumbai but in Tier 3, Tier 4 towns these co-operative banks are popular because they give micro and mini credit to those in the primary sector of the economy and who may not have the assets to mortgage to an adequate extent. So they have played an important role in agriculture, animal husbandry etc Also they are popular amongst the very small entrepreneur running a trade of say 2 taxis, or one truck. Dealing with them is less intimidating for semi-rural and rural folks. But they are at times within the sphere of some local politician family and that's more of a liability than an asset..

This is a relevant point sir. Many micro businesses find these institutions far more accessible that the large PSU banks. If these coop banks are inherently unsafe, then let the RBI issue a statement to that effect. At least people who park their hard earned money with them would know what they are getting into.

[VaibhaoT]

My parents have good chunk of their savings in local co-operative bank. In last 10 years, I attempted multiple times to move funds to nationalize bank, but I could not convince them. Local bank gives them 1% extra & that's enough for them to take the risk unfortunately.

I opened a HDFC bank account, where its way easy to transact than SBI. I even moved their funds to HDFC. But after some time, they moved it back. As per my father, director of bank is a "good man". Really difficult to argue with that.

Sometimes, I feel it's better to accept reality for own mental peace.

[Gaur]

My Father has one of his business related current account and a savings account with some FD's in this bank which is stuck now. The total amount is significantly over the DICGC limit and as per my understanding both the accounts will be considered as a single entity and will cover max 5lac, at this moment we can just wait and watch.

Thankfully there are deposits in other accounts in lager pvt./nationalized banks which can safely cushion this impact.

As much on the authorities i am equally angry on m father as i had multiple times asked him to close this account and shift to some larger pvt. or govt bank but he didn't listen.

His reason to continue with it was convenience, the closest branch is walking distance from his office and being an old customer the staff/local management knew him well and most of the work could be done over a phone call.

Apart from individuals many buildings in the neighborhood have their entire society corpus deposited with this bank, difficult times for them.

[Fuldagap]

Originally Posted by V.Narayan

Dealing with them is less intimidating for semi-rural and rural folks. But they are at times within the sphere of some local politician family and that's more of a liability than an asset.

Privileged folks?

Originally Posted by V.Narayan

Please help me as I'm struggling to put my head around this one.

Ahmedabad District Co-operative bank, comes under the purview of NABARD. Starting point would be an alleged 745 cr rs cash money deposit in 5 days. Notes being the 'demonetised' ones. One needs to understand the finer details, like exactly how much money was deposited in each account in question, not just the average deposit per account.

Moreover, this is just the tip of the iceberg.

Regarding the usage of aircrafts, starting point would be the Hindon airbase.

Originally Posted by V.Narayan

In India thanks to the yeoman work done by PSU banks since 1969 banking is available in every corner of the country. This is supplemented by the Co-operative Banks being discussed on this thread. In India of today we really cannot say that Banking is for the privileged only. Let's simply agree to disagree.

One has to see it from the shoes of a daily wage worker from say Bihar working in say Noida or a lowly paid household help trying to send a sum of Rs. 10,000/- through say SBI. Some may not even be let inside the branch, they need to go around the branch to a temporary bench where some agent would collect cash, deduct 10% and voila, the customer needs to wait and pray that his needy family receives money in time. For such customers, this is the normal way of doing banking.

The banks were forced to provide the 'yeoman service" that you have mentioned about. Except some banks that were created by the govt itself, every other older bank being a private bank earlier. Nationalisation of the banks was forced upon to clear the path for social banking, reach the real common man even if it meant to compulsorily operate branches under loss year on year for decades.

In retail banking, there is most often a tiny percentage of customers through which a particular branch remains operationally profitable. The rest of the customers are generally a burden on the branch costs.

India is vast, banking and banks are massive in numbers. RBI is great, governing and taking care of legal and ethical aspects of bank ops. But is it yeoman service? Depends upon who is being served and where by which bank.

Within even the top ‘too big to fail’ banks, there are islands of excellence; units that serve as examples for the rest of its units across the country. But it is not the same even inside the same bank everywhere. Be it urban, semi urban, rural or FI units.

Top it off with lakhs of crores of write offs, scams and frauds being done regularly through political interventions.

About co-operative banks, they are mostly owned by top politicians across the country. Earlier private money lenders were a menace. Nationalisation and self motivated excellent bankers were behind curbing it.

The current scenario is to clean the country of such banking where there is no respect for mandates or audits or norms as laid down by the RBI. One example of this is the case of UWB, a bank known for its exemplary customer service in Maharashtra years back. Had to be assimilated by a bigger bank to clean it up for malpractices, money laundering etc.

What seems ok to a normal person may not seem ok to a trained banker. Same goes when it comes to aircraft deployments. A civilian might not even get a hint of procedures being followed or not compared to a trained military personnel.