RBI Caps Deposit Withdrawal At Rs 50,000 For Ailing National Co-operative Bank

The Reserve Bank of India (RBI) has taken significant action against The National Co-operative Bank, a Bengaluru-based bank, due to its weak financial position. On 24 July, the RBI imposed business restrictions on the bank and limited deposit withdrawals to Rs 50,000 per account.

As part of the restrictions, the bank is not permitted to issue fresh loans or accept new deposits without prior approval from the central bank. However, it's important to note that the imposition of business restrictions does not entail the cancellation of the bank's banking license. The bank will continue to operate with these restrictions until its financial position improves.

To provide some relief to depositors, the RBI stated that they will be entitled to receive a deposit insurance claim amount of up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation.

The RBI had previously imposed a monetary penalty on The National Co-operative Bank in May for certain rule violations. Specifically, the bank was found to be collecting fixed penal charges for a shortfall in maintaining the minimum balance in savings bank accounts, instead of proportionate to the extent of the shortfall.

According to the last available annual report, as of 31 March 2021, The National Co-operative Bank had total deposits of Rs 1,679 crore and loans of Rs 1,128 crore. However, data beyond that date is not available. The bank's net non-performing assets as of 31 March 2021, stood at 27.81 percent, and it had a capital adequacy ratio of 12.12 per cent, as per the annual report. The bank operates approximately 13 branches across various parts of Bengaluru.

The business restrictions imposed by the RBI will be effective for a period of six months from 24 July 2023, subject to review, and the RBI may consider modifications based on future circumstances.