Mumbai’s New India Cooperative Bank Hit by ₹122 Crore Fraud, RBI Freezes Transactions

The Mumbai Police Economic Offences Wing (EOW) is investigating financial irregularities at New India Cooperative Bank following allegations of a ₹122 crore fraud by its former General Manager. In response, the RBI has imposed a six-month transaction freeze, causing panic among depositors unable to withdraw funds. The bank’s governance has been taken over by an RBI-appointed Administrator as authorities work on stabilizing operations.

 

CONTENTS:

• Alleged Fund Misappropriation by Bank Staff May Have Led to RBI’s Restrictions on New India Co-operative Bank
• New India Cooperative Bank Moratorium Traps Housing Societies, Lakhs of Depositors Affected

Mumbai’s New India Cooperative Bank Hit by ₹122 Crore Fraud, RBI Freezes Transactions

The Mumbai Police Economic Offences Wing (EOW) has launched an investigation into suspected financial irregularities at New India Cooperative Bank after receiving a complaint from a bank representative. Authorities are currently scrutinizing financial records and transaction details to identify any potential discrepancies.

 

Bank Representative’s Statement Recorded

As part of the preliminary probe, the EOW has documented the statement of a bank representative to gain insights into the nature and scope of the alleged financial mismanagement.

 

Investigation Underway

Officials are carefully reviewing financial transactions to pinpoint any violations. They have emphasized that the inquiry is still in its early stages, and efforts are ongoing to determine the origin of the irregularities.

 

Customer Panic After RBI’s Transaction Ban

A day after the Reserve Bank of India (RBI) imposed a six-month transaction freeze on New India Cooperative Bank Ltd, concerned customers rushed to its branches on Friday, seeking clarification regarding their deposits. The RBI’s decision followed concerns over irregular lending practices, sparking anxiety among account holders about the safety of their funds.

 

Withdrawals Blocked, Security Reinforced

Large crowds gathered outside bank branches as worried customers attempted to access their money. While locker access remained available, cash withdrawals were completely restricted. Notices at branch entrances assured customers that their funds would be returned within 90 days, but this did little to ease their concerns. To maintain order, police personnel were deployed at various branches.

 

Ex-General Manager Accused of Rs 122 Crore Fraud

Authorities have uncovered a major financial fraud involving the bank’s former General Manager, Hitesh Praveenchand Mehta, who is accused of misappropriating Rs 122 crore from the institution’s treasury.

 

Fraudulent Activities During His Tenure

Mehta, who oversaw the Dadar and Goregaon branches, allegedly exploited his position to siphon off funds from accounts linked to these locations.

 

FIR Registered Based on Bank’s Complaint

Following a complaint by the bank’s chief accounts officer, an FIR has been registered at Dadar Police Station. Investigators suspect Mehta may have had an accomplice in the scheme.

 

Case Transferred to EOW for Further Investigation

Given the scale of the fraud, authorities have handed over the case to the Economic Offences Wing for a thorough probe.

 

Fraud Took Place Between 2020 and 2025

According to the complaint, the misappropriation occurred over a five-year period between 2020 and 2025. The case has been registered under Sections 316(5) and 61(2) of the BNS, with an in-depth investigation currently underway.

 

Alleged Fund Misappropriation by Bank Staff May Have Led to RBI’s Restrictions on New India Co-operative Bank

On February 13, the Reserve Bank of India (RBI) imposed strict restrictions on New India Co-operative Bank, barring it from conducting new business or accepting deposits, citing supervisory concerns. Sources indicate that this action was likely triggered by allegations of fund misappropriation by bank staff.

 

Complaint Filed with EOW, Prompting RBI Action

According to sources, the Chief Compliance Officer of the co-operative bank may have lodged a complaint with the Economic Offences Wing (EOW), reporting financial irregularities involving bank employees. This complaint followed a spot inspection by the RBI earlier this month, which likely uncovered serious governance lapses.

 

RBI’s Restrictions on the Bank’s Operations

As per the central bank’s directive issued on February 13, New India Co-operative Bank has been prohibited from granting or renewing loans and advances, making new investments, borrowing funds, or accepting fresh deposits without prior RBI approval. Additionally, the bank is restricted from making any payments or engaging in any transactions involving the sale, transfer, or disposal of its assets.

 

Deposit Withdrawals Suspended Until August 2025

Following the RBI’s directive, depositors are unable to withdraw funds from their savings, current, or any other accounts for six months, ending on August 13, 2025. However, the bank has been permitted to offset loans against deposits under specific conditions.

 

Efforts to Restore Banking Operations

In response to the crisis, the Administrator and Advisors have been instructed to assess the situation promptly and work towards reviving normal banking operations as soon as possible.

 

RBI Supersedes Bank’s Board, Appoints New Leadership

To address governance failures, the RBI has dissolved the board of directors of New India Co-operative Bank for a period of 12 months. Shreekant, a former Chief General Manager of the State Bank of India (SBI), has been appointed as the Administrator to oversee the bank’s affairs. He will be supported by a Committee of Advisors, including Ravindra Sapra (former General Manager, SBI) and Abhijeet Deshmukh (Chartered Accountant).

 

RBI’s Statement on Governance Issues

The RBI’s press release emphasized that these actions were necessary due to significant governance deficiencies observed in the bank. The regulator aims to stabilize operations and ensure compliance with financial regulations.

 

New India Cooperative Bank Moratorium Traps Housing Societies, Lakhs of Depositors Affected

The Reserve Bank of India’s (RBI) decision to place New India Cooperative Bank under a moratorium has left numerous cooperative housing societies and lakhs of depositors in uncertainty. The restrictions, imposed due to supervisory concerns following recent developments, aim to safeguard depositors’ interests.

 

Alleged Fund Misappropriation Sparks RBI Action

The RBI’s intervention followed a spot inspection and a complaint by the bank’s Chief Compliance Officer to the Economic Offences Wing (EOW), alleging fund misappropriation by staff. A police source indicated that a bank official would soon be called to provide a statement regarding the allegations.

 

RBI Takes Over Governance, Potential Takeover by Another Bank

Citing mismanagement, the RBI has dissolved the bank’s board and appointed an Administrator along with a Committee of Advisors to oversee its revival. Banking industry sources speculate that another cooperative bank may eventually take over its operations.

 

Depositors Struggle Amidst Withdrawal Freeze

Anxious customers flocked to the bank’s branches across the Mumbai region, only to find banners assuring that deposits up to ₹5 lakh were insured and would be released within approximately 90 days. However, with no bank staff available to address their concerns, frustration grew among depositors, particularly senior citizens reliant on their funds for essential expenses.

Pandurang Kamble, a long-time account holder, voiced his distress:
“I have ₹5 lakh in fixed deposits, and my salary is credited here. What happens if the refund doesn’t come in 90 days? My wife is a cardiac patient—how will I break this news to her? The government must intervene.”

 

Deposit Insurance and Future Uncertainty

The RBI reassured small depositors, stating that amounts up to ₹5 lakh per depositor were protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme. This covers over 90% of the bank’s 1.3 lakh depositors. However, the final settlement of larger deposits will depend on the extent of financial losses reported by the bank in March 2025.

 

Bank’s Financial Status and Operational Cuts

As of March 31, 2024:

• The bank’s accumulated losses stood at ₹22.8 crore, down from ₹30.7 crore in FY23.
• Advances dropped by ₹155 crore (11.7%) to ₹1,174.8 crore.
• Deposits increased slightly by ₹30.5 crore (1.3%) to ₹2,436 crore.
• Working capital was ₹2,997 crore, with total reserve funds of ₹292.9 crore.

To reduce expenses, the bank had recently relocated branches and merged several locations, including consolidations in Mira Road and Pune.

 

Depositors Demand Answers

With many retirees and pensioners affected, tensions escalated outside bank branches. Police were deployed to maintain order, while customers expressed their helplessness.

Somashekhar Nair, a retired Virar resident, lamented:
“I’ve had an account here for 20 years. My pension and LIC payments come into this account. Why should I beg for money that is rightfully mine?”

Similarly, Ashok Bhosale, a former fire department employee, worried about his ₹15 lakh in fixed deposits. Others, like Shashikant Karambekar, remained hopeful due to the deposit insurance guarantee.

 

Decline of Urban Cooperative Banks

The crisis at New India Cooperative Bank highlights a broader trend. The number of urban cooperative banks fell from 1,502 in March 2023 to 1,472 in March 2024. These banks hold deposits totaling ₹5.56 lakh crore, of which ₹3.71 lakh crore is insured.

As depositors await further clarity, the RBI’s restrictions remain in force, preventing withdrawals but allowing essential expenses such as salaries, rent, and utility bills to be covered. The long-term fate of New India Cooperative Bank now hinges on regulatory actions and possible restructuring.

https://www.newindiabank.in/