The Bombay High Court on Monday (November 4) sought to know from the Reserve Bank of India (RBI) what steps it has taken to protect the interests of depositors of the crisis-hit Punjab and Maharashtra Cooperative (PMC) Bank.
A division bench of Justices SC Dharmadhikari and RI Chagla was hearing a bunch of petitions filed by the bank depositors, challenging restrictions imposed by the RBI on withdrawals.
On September 23, the RBI imposed regulatory restrictions on the PMC Bank for six months over alleged financial irregularities. The withdrawal limit for account holders was initially ₹1,000 per each customer for six months, which was later raised to ₹10,000 and then to ₹40,000.
On Monday, the bench said it only wanted to know what the RBI was doing in the case. “The RBI knows all the affairs of the bank in question. The RBI is the bankers bank and an expert body on such issues. We don’t want to interfere and dilute your (RBI’s) authority,” the court said. It said in such financial issues, the RBI will be the judge and not the court. It directed the RBI to file its affidavit and posted the matter for further hearing on November 19. The court refused to grant any interim relief in the matter. One of the petitioners sought direction to the RBI to permit depositors to access their lockers.
The court, while refusing to pass any order, said, “The court cannot allow access. How can we or anyone prevent the RBI from taking action? If the RBI says stay away from the bank, then do so.” It said the depositors could sue the bank if they wanted.
The bench said by filing multiple petitions, lawyers should not give false hopes to depositors that the courts will help them. “Courts are not magicians. Let us not give false hopes to the depositors,” Justice Dharmadhikari said.
The court said while it is aware several depositors are left in the lurch, but it also cannot be said that many of the depositors were unaware of what was happening in the bank. The petitions have been filed by persons claiming to be depositors and account holders of the bank. The RBI restrictions earlier triggered protests by depositors and account holders of the cooperative lender.
“The RBI’s decision is irrational and arbitrary and is violative of the fundamental rights of common public. There was no prior intimation given by the RBI,” one of the petitions said. It said the directives have caused anguish and sufferings to people whose hard-earned money is locked in the bank. The petitions sought quashing of the RBI’s decision.
The crisis at the bank is attributed to loans made to realty player Housing Development Infrastructure Ltd (HDIL), which were allegedly hidden from regulators scrutiny, turning non-performing assets. Five persons, including HDIL promoters and banks top management, have been arrested.
The Enforcement Directorate too is investigating the case and has attached the assets of HDIL promoters, Rakesh Wadhawan and his son Sarang Wadhawan, who are in its custody. Over ₹6,500 crore of the banks advances of ₹9,000 crore were made to either HDIL or dummy companies affiliated to it, which have gone sour.
The bank has deposits of over ₹11,000 crore and the RBI has said that 77 per cent of the depositors can withdraw their money with the ₹40,000 limit. The administrator put by RBI to oversee the banks operations is presently restating the books to present a fair picture of its financial strength.