Chaos Outside New India Co-operative Bank Branches as RBI Imposes Restrictions on Withdrawals

Mumbai February 14, 2025: Panic spread among customers of the New India Co-operative Bank in Mumbai as long queues formed outside its branches following the Reserve Bank of India’s (RBI) sudden restrictions on withdrawals. The RBI’s directives, issued on Thursday due to supervisory concerns, have caused widespread anxiety among depositors, with distressing visuals of customers, including senior citizens, surfacing online.

In a swift move to address concerns over the bank's financial stability, the RBI imposed a six-month restriction on withdrawals from savings and current accounts, effective from Thursday evening. The restriction was enforced due to the bank's current liquidity position, and while the RBI assured that funds could still be used for essential expenses like salaries and rent, it banned the bank from renewing loans, making new investments, or accepting fresh deposits without prior approval.

Many customers, particularly elderly individuals, gathered outside the bank, clutching documents and seeking clarity on their savings. Bank officials were seen distributing coupons, which allowed customers access to their lockers, but the sudden restriction on cash withdrawals has left many in a state of panic.

Seema Waghmare, a distressed customer, shared her frustration with ANI, stating, “We deposited money just yesterday, but no one warned us about this. Now, they say we’ll get our money in three months, but we have EMIs and bills to pay. How are we supposed to manage?”

The RBI's order, issued under Section 35A and Section 56 of the Banking Regulation Act, 1949, has sent shockwaves through the bank's clientele. The restrictions will remain in force for a period of six months, subject to review. While the move aims to safeguard the interests of depositors, the abrupt nature of the announcement has caused widespread uncertainty.

As the situation continues to develop, customers are awaiting further clarification from both the bank and the RBI. The bank has been permitted to use deposits for essential expenses, but with no immediate resolution in sight, customers are left to navigate the fallout from the restrictions.

The RBI has clarified that the measures were taken in light of concerning financial developments at the bank, which prompted supervisory intervention. The central bank's move reflects growing concerns over the financial health of cooperative banks in the country, and the restrictions are expected to serve as a wake-up call to other institutions in the sector.

While the RBI’s decision is aimed at ensuring the safety of depositors' funds, the situation at the New India Co-operative Bank highlights the growing vulnerability of customers to sudden regulatory actions in the banking sector.