New Delhi: Restrictions on cash withdrawals from the scam-hit Punjab and Maharashtra Cooperative (PMC) Bank Ltd were based on the bank’s liquidity position and ability to pay its depositors, RBI told the Delhi High Court on Tuesday.
Justifying its action on putting cap on withdrawals, Reserve Bank of India (RBI) said restrictions were placed due to liquidity and solvency issues but that does not “extinguish the liability” of the bank towards the depositors.
“The steps taken by RBI are not arbitrary in nature. Directions under Section 35A of the Banking Regulation Act 1949 (AACS) were issued in view of the large scale irregularities and wrong doings committed by the bank to prevent further deterioration of the bank’s financials and also aim at protecting the interest of depositors,” RBI said.
The submissions were made in response to a PIL seeking removal of restrictions on cash withdrawals from the PMC Bank.
The central bank further said that the move to restrict payment of deposits was based on available liquidity to prevent any discretionary and discriminatory payment to the small body of depositors.
Seeking dismissal of the plea, it told the court that all concerned authorities are working in close co-ordination for speedy resolution of this crisis and therefore no intervention from this court is desired at this juncture.
The RBI said is has not violated any fundamental rights of the petitioners and directions for invoking Article 226 of the Constitution of India against RBI and the petition was not maintainable.
The PMC Bank has been put under restrictions by the RBI, following the unearthing of a Rs 4,355-crore scam.
Cash withdrawals have been capped by the RBI at Rs 40,000 for a six-month period, causing panic and distress among the bank’s customers, petitioner Bejon Kumar Misra had said in his plea.
In the petition, Misra had sought quashing of the RBI notifications by which the restrictions were placed on cash withdrawals from the bank.
He has also said a full insurance coverage of the depositors’ money was the need of the hour, “considering the reoccurrence of financial scams in co-operative and nationalised banks”.
The plea was first moved by Misra in the Supreme Court, which refused to entertain it last month and asked him to approach the high court.
Subsequently, he filed the petition in the Delhi High Court.
The petition has sought directions to the Centre and the RBI for constituting a high-powered committee to look into the working and operations of all cooperative banks “in order to have a robust and transparent mechanism, which can inspire confidence of the public in cooperative banks”.
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Source: News18