On February 14, the Reserve Bank of India (RBI) imposed restrictions on Mumbai-based New India Cooperative Bank Ltd over supervisory issues. Depositors have been barred from withdrawing funds from the financial institution because the lender confronted liquidity points.
This is not the primary time a co-operative financial institution has run into RBI’ blacklist. On September 23, 2019, RBI had positioned comparable restrictions on Punjab and Maharashtra Co-operative Bank (PMC) after it got here to mild that PMC Bank’s prime administration was concerned in an alleged mortgage fraud case. In consequence, almost 17 lakh depositors have been barred from withdrawing cash from the financial institution.
This leads us to a pertinent query: how secure are our deposits in co-operative banks? In line with Chirag Chauhan, a chartered accountant (CA) by occupation, parking your hard-earned cash in a co-operative financial institution is a poor monetary resolution.
“Cash in co-operative banks is not secure and safe. Solely people with restricted information are likely to park their funds in co-operative banks, generally in trade for a barely larger rate of interest of 0.50%. Nonetheless, this small profit is not well worth the danger,” he shared on X.
“Your cash is secure solely in public sector banks (PSUs), even throughout crises. For instance, Punjab Nationwide Bank (PNB) did not default on deposits throughout powerful instances, as PSU banks are backed by the federal government. The Reserve Bank of India (RBI) ought to implement stricter rules for co-operative banks to guard depositors from struggling losses,” he added, in reference to the restrictions imposed on PNB in 2018 after the lender was implicated in a major monetary fraud involving fraudulent Letters of Enterprise (LoUs) amounting to roughly $1.4 billion. This rip-off, orchestrated by jeweler Nirav Modi and his associates, led to substantial scrutiny of PNB’s inside controls and danger administration practices.
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