On February 14, the Reserve Bank of India (RBI) imposed restrictions on New India Cooperative Bank Ltd, based in Mumbai, on supervision concerns. The depositors were prohibited to withdraw funds from the bank because the lender was faced with liquidity problems.
This is not the first time that a cooperative bank has been meeting the RBI black list. On September 23, 2019, RBI had imposed similar restrictions on Punjab and Maharashtra Co-Optive Bank (PMC) after being revealed that the senior management of the PMC bank was involved in an alleged case of loans. Consequently, nearly 17 Lakh depositors were prohibited from withdrawing the bank’s money.
This brings us to a relevant question: what is the security of our deposits in cooperative banks? According to Chirag Chauhan, an authorized accountant (CA) by profession, parking your money hard in a cooperative bank is a bad financial decision.
“Money in cooperative banks is not safe. Only people with limited knowledge tend to park their funds in cooperative banks, sometimes in exchange for a slightly higher interest rate of 0.50 %.
“Your money is only sure in the banks of the public sector (PSU), even during crises. For example, the National Bank of Punjab (PNB) did not make any faults on deposits during difficult times, because PSU banks are supported by the government. In reference to the restrictions imposed on the PNB in 2018 after the lender was involved in significant financial fraud involving fraudulent corporate letters (Lus) amounting to around $ 1.4 billion. This scam, orchestrated by the jeweler Nirav Modi and his partners, led to a meticulous examination of internal controls and PNB risk management practices.
