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The Reserve Bank of India (RBI) on Tuesday informed the Bombay High Court that it has appointed a retired officer as administrator for the Punjab and Maharashtra Cooperative Bank (PMC Bank). The RBI further informed the Court that the depositors can approach the administrator to withdraw up to Rs. one lakh on hardship grounds.
A Division Bench of Justices SC Dharmadhikari and RI Chagla has been hearing pleas by aggrieved account holders of the PMC Bank. The Court had earlier asked the RBI to file affidavit enlisting necessary steps taken to prevent further damage to the depositors.
In its affidavit filed today, RBI has submitted that,
“The depositors having medical treatment, marriages, education, livelihood, and other hardships can approach the administrator for withdrawal of amount up to Rs. one lakh. The administrator will decide the application on merit.”
The RBI, in its affidavit further clarified that the emergency withdrawal will be subject to the ceiling of Rs. one lakh on medical grounds and sub-ceiling of Rs. 50, 000 in all other cases.
In this regard, the RBI also submitted that currently, the withdrawal limit has been increased to Rs. 50,000. The RBI stated that with this raise, nearly 78 % of the depositors of the PMC Bank will be able to withdraw their entire account balance.
Senior Counsel Venkatesh Dhond appearing for RBI today said that the probe was initiated based on the complaint from a Senior official, an insider in the Bank.
“The mess is being investigated. The top 15 PMC bank officials were aware of large-scale wrongdoing. We will increase withdrawal limits once a picture emerges out of an ongoing investigation and solvency of the Bank.”
It was mentioned in the complaint that the Bank sanctioned credit facilities to Housing Development and Infrastructure Limited (HDIL) in violation of prudent banking. RBI further told the Court that preliminary findings of the inspection revealed both serious financial irregularities and precarious condition of the Bank.
“The accounts related to HDIL were kept off the book and fictitious accounts were created using certain software. In one of the cases, the Bank had to pay an amount to the tune of Rs. 60 Crore out of depositors’ money,” said Dhond.
Advocate Pradnya Talekar for the petitioner claimed that the RBI was in collusion with the PMC Bank and failed to take necessary measures. The petitioners on Tuesday submitted that the RBI cannot impose withdrawal limits under the Banking Regulation Act on depositors at the cost of the fraud done by the officials
The petitioners requested the Court to pass directions on withdrawal limits.
However, the Bench led by Justice SC Dharmadhikari said,
“We cannot decide on the withdrawal limits. It is RBI’s prerogative. It will be impossible for the High Court to interpret the Banking Regulation law at this stage and it will have a cascading effect.“
During the last hearing, Justice Dharmadhikari had said that if it is satisfied with RBI’s reply, it will not interfere in the matter. The Bench further said that it cannot issue directions to the RBI at the moment.
“We are not magicians. Do not give false hopes to the people standing behind you (account holders). If we are satisfied with RBI’s reply, we will not interfere further.”
On Tuesday, hundreds of depositors gathered outside the High Court raising slogans against the RBI and PMC Bank management before they were asked to leave the premises by the Police.
The petitioners in their writ pleas and Public Interest Litigation have highlighted that the RBI restriction on the PMC Bank is detrimental to account holders or depositors at large, who have invested their own hard-earned money in the Bank.
The pleas state that the RBI’s decision under Section 35 (A) of the Banking Regulation Act, 1949 taken under the guise of ‘public interest’ deprives depositors their rights to have access to their own property, which itself is contradictory with the provisions of the Act.
The Court has now directed the petitioners to file a rejoinder within two weeks and posted the matter for further hearing on December 4.