RBI Governor Urges Urban Co-op Banks To Uphold Trust Placed By Depositors; Check Details Here

The meeting comes amid growing scrutiny of the urban cooperative banking sector, following allegations of financial misappropriation at the New India Cooperative Bank

Reserve Bank of India (RBI) Governor Sanjay Malhotra urged urban cooperative banks (UCBs) to remain "mindful" of their responsibilities, especially given the "trust" placed in them by depositors. The RBI Governor held discussions with stakeholders from selected UCBs on Wednesday, as well as representatives from the National Urban Cooperative Finance and Development Corporation Limited (NUCFDC) and the National Federation of Urban Cooperative Banks & Credit Societies Limited (NAFCUB), according to an official statement. This meeting was part of the RBI’s ongoing series of engagements with its regulated entities.

During the session, Malhotra stressed that while the RBI would continue to support the sector’s growth ambitions, UCBs must uphold high customer service standards to gain and retain trust. He also highlighted the importance of operational resilience, particularly in managing IT and cyber-related risks, according to a Business Standard report.

Malhotra recognised the crucial role that UCBs play in advancing financial inclusion at the grassroots level and welcomed input on the regulatory and operational challenges the sector faces. RBI Deputy Governors M Rajeshwar Rao and Swaminathan J, along with executive directors responsible for regulation and supervision, also attended the meeting.

The meeting comes amid growing scrutiny of the urban cooperative banking sector, following allegations of financial misappropriation at the New India Cooperative Bank.

Financial Irregularities 

The financial misconduct at New India Cooperative Bank was recognised during an internal audit, which revealed significant cash shortages at the bank’s Prabhadevi and Goregaon branches in Mumbai. As a result, the RBI imposed stringent restrictions on the bank, including limits on deposit withdrawals, citing concerns over its supervision. This caused widespread panic among depositors, many of whom were seen lining up outside the locked branches.

Two days later, on February 15, the Economic Offences Wing (EOW) of Mumbai Police arrested Hitesh Mehta, the bank’s general manager and head of accounts, on charges of embezzling Rs 122 crore. On February 16, the RBI took further action by superseding the cooperative bank’s board and appointing an administrator to manage its operations for the next year.