Almost two weeks after imposing business restrictions on New India Co-operative Bank, the Reserve Bank of India has relaxed the conditions and permitted the lender’s depositors to withdraw up to Rs 25,000 from 27 February.

In a statement on Monday, the RBI said that after reviewing the bank’s liquidity position in consultation with the administrator, it has “decided to allow a deposit withdrawal of up to Rs 25,000 per depositor, with effect from 27 February”.

The new directive will enable more than 50% of New India Co-operative Bank depositors to withdraw their entire balances. The remaining depositors can draw up to Rs 25,000 from their deposit accounts.

The depositors will be able to withdraw money from ATMs or bank branches. However, the total amount that can be withdrawn will be Rs 25,000 per depositor or the balance available in their account, whichever is lower, the RBI said.

The bank has 28 branches, mostly located in the Mumbai region.

“The Reserve Bank is closely monitoring the developments and shall continue to take necessary steps in the interest of the depositors of the bank,” the central bank said.

On 13 February, the RBI imposed several restrictions on New India Co-operative Bank, including a ban on deposit withdrawals, and said it would remain in force for six months and be subject to review. A day after, the RBI superseded the board of directors of New India Co-operative Bank for a period of 12 months.

The RBI had then stated that eligible depositors would be entitled to receive deposit insurance claim amount of their deposits up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). 

On 15 February, the bank's ex-GM and head of accounts, Hitesh Pravinchand Mehta, was arrested for allegedly siphoning Rs 122 crore from the lender.

The scam allegedly took place after Covid-19, with Rs 112 crore misappropriated from the Prabhadevi branch and Rs 10 crore from Goregaon.  

The New India Cooperative Bank began operations in 1968 as the Bombay Labour Cooperative Bank, under the aegis of founding fathers George Fernandes,  former minister, and Ranjit Bhanu,  a noted criminal lawyer, trade unionist and a member of legislative assembly.

According to the bank’s website, the founding fathers were inspired by the model of the German Labour Bank, which straddled the divide between workers and businessmen. The aim was to contribute to the socio-economic progress of workers and small businesses.

As on March 2024, the bank held deposits of Rs 2,436.4crore.