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Key Details
- Institution: New India Co-operative Bank Ltd., Mumbai
- Action: Excluded from the Second Schedule to the RBI Act, 1934
- Notification: CO.DOR.RAUG.No.S7907/08.27.498/2025-26 (Jan 06, 2026)
- Context: Administrative closure following the August 2025 amalgamation with Saraswat Co-operative Bank Ltd.
Root Cause Analysis (RCA)
- Internal Fraud: A ₹122 crore embezzlement scam executed by top management over five years.
- Financial Collapse: Resulted in a negative net worth and severe liquidity crisis, forcing RBI intervention in early 2025.
- Governance Failure: Lack of proper internal audits and risk management protocols allowed the diversion of funds to go unchecked.
Preventive Controls
- Strict enforcement of maker-checker rules for vault and treasury operations.
- Mandatory job rotation and block leave for employees in sensitive financial positions.
- Implementation of automated, real-time reconciliation between physical cash and Core Banking Systems.
Lessons Learnt
- Swift regulatory intervention (board supersession) is critical to halt the erosion of depositor funds.
- Strategic bank amalgamations serve as a highly effective safety net, fully protecting depositors without financial haircuts.
- Robust internal governance is more critical than deposit insurance limits (₹5 lakh) in maintaining systemic trust.
