Mumbai, Feb 14 (PTI) A day after imposing business restrictions on the city-headquartered New India Cooperative Bank, the Reserve Bank on Friday superseded the lender’s board citing governance lapses and appointed an administrator to revive it.

Details of what led to the crisis at the bank started emerging on Friday, with sources blaming misappropriation of funds by some staffers. However, the amount involved and the identities of perpetrators were not immediately known.

Harried customers of the bank started thronging the cooperative bank's branches since morning hoping to access their savings, but were denied entry into the premises.

Sources said that 90 per cent of the 1.3 lakh depositors will get their entire deposits back, as the amount is up to Rs 5 lakh covered under deposit insurance. All the customers claimed that they do not have any communication from the bank on when they will be able to access their funds.

"My grandfather has an account in the bank and I came to the branch in the morning to withdraw money to pay for his hospital expenses. Now, I am told that the money cannot be withdrawn. I will borrow the money from someone and can only get my grandfather discharged tomorrow," Shraddha Gupta, 24, said.

Gupta said her grandfather has savings of Rs 60,000 whereas the hospital bill is Rs 40,000.

Other customers at the branch in Andheri, which had a heavy posse of policemen outside, said only the ones having hired lockers were allowed into the premises on Friday and bank officials had locked themselves up inside.

On Friday, the Reserve Bank of India (RBI) superseded the board for a year, and appointed Shreekant, a former chief general manager of State Bank of India (SBI) as Administrator' to manage affairs.

It has also appointed a Committee of Advisors' to assist the Administrator in discharging his duties, which will include Ravindra Sapra (former General Manager, SBI) and Abhijeet Deshmukh (chartered accountant).

"The action is necessitated due to certain material concerns emanating from poor governance standards observed in the bank," it said.

As per the sources, the bank's chief compliance officer (CCO) approached the Mumbai Police's Economic Offence Wing on Thursday following the discovery of some lapses in a 'spot inspection' of its books by RBI.

The issue pertains to misappropriation of funds by some staff members of the bank, they said, without revealing the overall amount or the identities of the people involved.

The RBI had on Thursday prohibited the bank from issuing new loans and suspended deposit withdrawals, and followed it up by superseding the bank's board for mismanagement on Friday.

On Thursday, the RBI had imposed several restrictions on the lender including on withdrawal of funds by depositors, amid supervisory concerns.

The restrictions came into force from the close of business on Thursday and would remain in force for a period of six months and are subject to review.

"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...," the RBI said while imposing the restrictions.

The lender, however, has been allowed to set off loans against deposits subject to the conditions stated in the RBI directions. It may incur expenditure in respect of certain essential items such as salaries of employees, rent, and electricity bills.

The RBI further said as from the close of business on February 13, 2025, the bank shall not, without prior approval, grant or renew any loans and advances, make any investment, and incur any liability, including acceptance of fresh deposits.

It further said the directions were necessitated due to supervisory concerns emanating from the recent material developments in the bank, and to protect the interest of depositors of the bank.

As of March 2024, the bank had 28 branches. Its overall assets decreased to Rs 1,175 crore from the year-ago period's Rs 1,330 crore, and the gross non-performing assets ratio increased to nearly 7.96 per cent as of March 31, 2024.

Most of the bank's 28 branches are located in the Mumbai megapolis, and it also has two branches at Surat in neighbouring Gujarat and one in Pune.

The overall deposit base increased marginally to Rs 2,436 crore at the end of FY24 from Rs 2,406 crore in the year-ago period. Over two-thirds of the deposits are term deposits, as per the bank's annual report.

The bank was started in 1968 by staffers of a state-run general insurer with a similar name, and differs from peers in the cooperative banking world because it does not have any roots in a particular community. It does not have any political leanings either, as per people in the know. PTI AA MR MR

Supersession of bank board halts new lending and limits withdrawals to protect insured depositors during administration. The Reserve Bank superseded New India Cooperative Bank's board and appointed an Administrator and Committee of Advisors, imposing time-bound business restrictions that bar new lending, limit withdrawals except as covered by deposit insurance, prohibit investments and fresh liabilities without prior approval, and permit only essential expenditures and prescribed set-offs, citing supervisory concerns arising from a spot inspection that uncovered alleged misappropriation of funds and governance lapses.