PMC Bank scam: Bombay HC rejects plea for removal of withdrawal restrictions.

Source – indianexpress.com

The Bombay High Court on Thursday dismissed petitions filed by depositors of the Punjab and Maharashtra Cooperative (PMC) Bank seeking removal of restrictions on withdrawals imposed by the Reserve Bank of India (RBI), following crisis in the bank over the last few months. The current withdrawal limit for depositors is Rs 50,000, with an extension up to Rs 1 lakh on medical grounds.

The division bench of Justices S C Dharmadhikari and R I Chagla accepted the contention of the RBI that the limits were set to protect the interest of the bank, as well as its depositors. The court said that the allegations made by the petitioners against the RBI were ‘vague’ and ‘contradictory’.

The court said that while the petitioners had argued that the RBI had no powers to put such restrictions, they were also raising the issue that the RBI had not stepped in earlier to stop the violations in the PMC Bank. “There is nothing to show that the RBI had deliberately not stepped in earlier, or has deliberately stepped in at this stage in order not to protect the interests of the depositors. The RBI is trying to take stock…it is trying to ascertain ways to bring some normalcy and bring some form of discipline,” the court said. It agreed with the contention made by the RBI that the restrictions were put in place also to ensure that those close to the management of the bank do not get undue access in withdrawing their money while others are left in the lurch.

Senior counsel Venkatesh Dhond, representing the RBI, had earlier submitted that 29 per cent of the deposits of the PMC Bank had eroded. “The impression people have is that the RBI is sitting with the reserves available at the PMC Bank and is imposing unnecessary restrictions on their hard-earned money. That is not a correct picture. Depositors are not aware of the extent of the rot in the bank, it has negative net worth right now. RBI will relax withdrawal limit further if the liquidity position improves. The RBI-appointed administrator is trying to recover assets from HDIL Group,” Dhond told the court.

The High Court said that it did not accept the contention of the petitioners that the RBI does not have powers to impose such restrictions. The bench also said the petitioners cannot blame the banking system as a whole. It said that the relationship between the banker and a customer is ‘contractual’ and if there is any breach of contract, the depositors can also approach a competent court.

The Mumbai Police Economic Offences Wing and Enforcement Directorate in parallel probes have arrested officials of the PMC Bank, as well as HDIL Group, claiming that over 20,000 fictitious loan accounts were created by them in connivance to camouflage large scale financial irregularities.