Winning Bizness Desk

Mumbai The Reserve Bank of India (RBI) has imposed restrictions on New India Co-operative Bank in Mumbai, Maharashtra, following the discovery of certain irregularities within the bank. This action is not unprecedented; previously, the RBI has taken similar measures against banks such as Shirpur Merchants Co-operative Bank, Punjab and Maharashtra Co-operative Bank (PMC), and Yes Bank due to various discrepancies.

In instances where banks have engaged in fraudulent activities concerning depositors' funds, the RBI conducts thorough investigations. If initial findings confirm misconduct, the RBI may impose restrictions on the bank, which can include limiting or halting withdrawals until the investigation concludes.

Depositors are entitled to a maximum refund of ₹5 lakh

Should a bank fail or have its license revoked by the RBI, depositors are entitled to a maximum refund of ₹500,000, regardless of the total amount deposited. This insurance coverage is provided under the Deposit Insurance and Credit Guarantee Corporation (DICGC) regulations.

For example, if an individual has ₹200,000 in a savings account, ₹200,000 in a fixed deposit, and ₹300,000 in another account within the same bank, totaling ₹700,000, they would only be eligible to recover up to ₹500,000 if the bank collapses, even if the funds are spread across different branches of the same bank.

Do not to keep all money in a single bank

To safeguard one's funds, it is advisable not to keep all money in a single bank. Distributing deposits across multiple banks ensures that if one bank fails, the depositor can still recover up to ₹500,000 from each affected bank. For instance, if an individual has ₹800,000, they could deposit ₹400,000 in one bank and ₹400,000 in another. If both banks were to fail, the depositor would be eligible to recover the full ₹800,000, as each bank's deposits are insured separately up to the ₹500,000 limit.

Avoid parking funds in small or local banks

It is also recommended to avoid placing funds in small or local banks. Instead, opting for public sector banks (PSUs) or large private banks is prudent, as they typically maintain higher standards of corporate governance and regulatory compliance. Unless necessary, depositing large sums in co-operative banks should be approached with caution. Additionally, maintaining deposits within the ₹500,000 insurance limit per bank is a wise strategy to ensure maximum coverage.