People from Maharashtra and Gujarat woke up on Friday the 14th to the news that RBI had put restrictions on New India Cooperative Bank and stopped all its operations.
Depositors could no longer withdraw any money, the bank could no longer issue any loans, accept deposits or pay its customers or honor any instrument (like cheque, bank draft, etc), issued by it.
The bank was put in the hands of an administrator, its board dissolved.
A couple of days later, a scam seems to have broken out in the story.
Their Chief General Manager had apparently been taking away cash from the bank’s vault.
He seems to have siphoned off 122 Crore in cash, a first in banking industry and given it to a builder and a couple of others.
Hitesh Mehta, the Chief General Manager, has been arrested by EOW.
A bank has in place several fail safe mechanisms but it seems all of them failed. It is now emerging that some employees had written an official letter to RBI way back in 2021, after the Covid period and flagged these irregularities but to no avail.
A bank, any bank, has internal auditors, external auditors and everyone is regulated by RBI. The rise in cash balance in the banks vaults should have raised alarms but this was ignored.
Eventually, when RBI officials walked into the cash vault, they found 122 Crores missing.
This is around 5% of the banks total deposits of around 2400 Crores.
Question is, will anyone on the auditors panel, internal as well as external, RBI officers, be found responsible and punished?
Meanwhile depositors have to wait for 90 days before they can get their hands on their own money. That too will be paid by DGIC (Deposit Guarantee Insurance Corporation) to a maximum of 5 Lakhs only after due verification.
Many cooperative housing societies have their account with this bank. Many hold huge deposits, ranging between 10 Lakhs to Crores in this bank. Their statutory funds, like the Building Repair Fund, Sinking Fund accounts too are in this bank. Suddenly, they find themselves in a lurch.
When a cooperative bank falls, like the recent case of Punjab and Maharashtra Bank, brought down by reckless lending to DHFL, the regulator, RBI, washes its hands off and the depositors are left in the lurch.
It seems that the depositors are being punished for banking with a cooperative bank. If RBI fails to address this problem, confidence in the cooperative banks will evaporate and the sector will collapse.
Ultimately, the buck should stop with RBI.
