The New India Co-operative Bank is grappling with a severe financial crisis after incurring consecutive losses for the past two fiscal years, culminating in FY 2024. As of March 2024, the bank’s loan book stood at ₹1,174.85 crore, while its total deposits amounted to ₹2,436.38 crore. Notably, around 60% of the deposits are set to mature within one to three years, and approximately 75% of the bank’s loan portfolio is concentrated in the real estate sector. This overexposure to a single sector has raised alarming concerns about the bank’s stability and future.
Rising Risks in Real Estate Sector
The bank’s heavy investment in the real estate sector has grown substantially over the past few years. In FY 2020, its exposure to real estate was only 11.4%, but this surged to 35.6% by FY 2024. By the end of the fiscal year, the bank had invested ₹418.34 crore in the sector, covering both residential and commercial projects. This increased reliance on the real estate market has severely affected the bank’s asset quality, leading to a spike in its non-performing asset (NPA) ratio, which rose to 7.96% as of March 2024.
RBI Intervenes with Stringent Measures
Due to financial mismanagement and growing concerns about depositor protection, the Reserve Bank of India (RBI) has imposed strict operational restrictions on the New India Co-operative Bank. These restrictions prohibit the bank from allowing deposit withdrawals, issuing new loans, or accepting fresh deposits. The regulatory directives will remain in effect for six months, significantly hampering the bank’s routine operations and raising concerns among customers.
Anxiety Among Customers and Deposit Safety
Following RBI’s sudden intervention, depositors have been left anxious about the security of their funds. However, there is a safety net in place—each depositor’s funds up to ₹5 lakh are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme. This insurance provides some financial relief and security to the affected account holders.
A Wake-Up Call for the Co-operative Banking Sector
The crisis at New India Co-operative Bank serves as a stark reminder of the vulnerabilities in the co-operative banking sector. It underscores the urgent need for stronger supervision, stricter regulations, and improved risk management practices to prevent such financial disruptions in the future and safeguard the interests of depositors.