The Reserve Bank of India (RBI) has taken significant measures in response to the National Co-operative Bank’s weak financial position, limiting the withdrawal amount to Rs 50,000 for its account holders.
Moreover, the bank is prohibited from issuing new loans or accepting fresh deposits without the central bank’s approval.
Business Restrictions Imposed for Six Months
Effective from July 24, 2023, the RBI has imposed business restrictions on the National Co-operative Bank for a period of six months, subject to review.
During this period, the bank’s financial operations will be under scrutiny, ensuring a cautious approach to protect depositors’ interests.
Deposit Insurance Protection
Depositors can rest assured that their funds are protected up to Rs 5 lakh by the Deposit Insurance and Credit Guarantee Corporation under the deposit insurance scheme.
Despite these business restrictions, the RBI has clarified that the bank’s banking license remains intact, and it can continue its operations within the imposed limitations until its financial position improves.
Penalty Imposed by RBI in May
This recent action is not the first time the RBI has intervened with the National Co-operative Bank.
In May, the bank was penalized by the RBI for violating certain norms, specifically, charging fixed penal charges instead of proportionate penalties for shortfalls in maintaining the minimum balance in savings accounts.
Financial Snapshot of the National Co-operative Bank
As of March 31, 2021, the National Co-operative Bank had total deposits of Rs 1,679 crore and loans of Rs 1,128 crore, according to its last annual report.
However, data beyond that date is not available.
The bank’s net NPA assets were reported at 27.81 per cent, while its capital adequacy ratio stood at 12.12 per cent at the end of the financial year 2020-2021.