SC Refuses To Entertain Petition By Punjab & Maharashtra Co-Operative Bank Depositors To Lift Withdrawal Limits

The Supreme Court has refused to entertain a plea by Punjab & Maharashtra Co-operative (PMC) Bank account holders seeking lifting of restrictions on cash withdrawals.

Coming as a setback to PMC Bank depositors, the Supreme Court urged them to seek relief from the relevant high court instead.

It may be recalled that recently the Reserve Bank of India (RBI) had placed limits on withdrawal of savings by depositors after it found out about financial irregularities in the functioning of the PMC Bank as well as the loans illegally given to defaulter real estate developer HDIL.

The RBI had imposed regulatory restrictions on PMC Bank under Section 35A of the Banking Regulation Act.

The RBI found that the bank’s exposure to HDIL was far in excess of what the regulations permit as well as the fact that the lender had hidden HDIL’s non-performing assets (NPAs). PMC’s exposure to HDIL was found to be around Rs 6,500 crore, which is 73% of its loan book of Rs 8,880 crore, as per the bank’s own admission.

Incidentally, the petition which was not entertained by the Supreme Court, was filed by a certain Bejon Kumar Misra from Delhi, who had sought a direction for issuance of “exhaustive and comprehensive guidelines” to safeguard deposits in the eventuality of emergency financial crisis.

Stating that the RBI's move had caused “disastrous consequences” for depositors, the petitioner had prayed that the RBI notifications issued by the banking regulator should be declared ultra vires Articles 14 and 21 of the Constitution.

The petition stated that the central government and the Reserve Bank of India (RBI) should be directed to ensure complete insulation and insurance of deposits in various co-operative banks, including nationalized banks, by enacting an appropriate measure of 100% insurance coverage towards deposited amounts.

The petition has urged that a high-powered committee should be constituted to look into the working and operations in all co-operative banks in order to have a robust and transparent mechanism which inspires confidence in co-operative banks.