CNN Central News & Network–ITDC India Epress/ITDC News Bhopal: The restrictions imposed by the Reserve Bank of India (RBI) on Mumbai-based New India Cooperative Bank once again highlight the vulnerabilities of the country’s cooperative banking system. Due to financial irregularities, RBI has barred the bank from issuing new loans, renewing existing ones, accepting fresh deposits, or allowing withdrawals by depositors. These restrictions will remain in effect for six months from February 13, 2025. However, the bank is permitted to pay salaries, rent, and essential operational expenses.

Following this announcement, crowds of anxious customers gathered outside the bank’s branches. Most depositors are worried about their hard-earned money, uncertain about the safety of their deposits. The bank has clarified that deposits up to ₹5 lakh are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) and will be refunded within 90 days after verification. However, the bigger concern remains—what will happen to customers until the process is completed?

India’s cooperative banking system has long been a crucial financial support for small businesses, farmers, and the middle class. However, recent failures of PMC Bank, CKP Cooperative Bank, and others have raised serious concerns about its reliability. Repeated instances of financial mismanagement and irregularities are shaking public confidence in these banks.

This crisis underscores the urgent need for reforms in cooperative banking operations. Without stricter regulations, transparency, and responsible management, such problems will continue to surface. The RBI must tighten financial reporting and auditing mechanisms to detect irregularities early. At the same time, customers must also be aware and not deposit their money solely based on trust but also consider the bank’s financial health and regulatory compliance.

The crisis at New India Cooperative Bank is not just about one institution—it highlights the broader need for systemic reforms in the cooperative banking sector. If concrete measures are not taken, depositor insecurity and distrust in the banking system will only grow. While RBI must intensify its supervision, the government must also ensure that cooperative banking remains a strong and secure financial alternative. This is not just about depositor protection but also about maintaining the credibility of India’s banking system.

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