HC quashes pleas against PMC Bank withdrawal limit

The Bombay high court (HC) on Thursday refused to interfere with restrictions imposed by the Reserve Bank of India (RBI) on withdrawals from fraud-hit Punjab and

The Bombay high court (HC) on Thursday refused to interfere with restrictions imposed by the Reserve Bank of India (RBI) on withdrawals from fraud-hit Punjab and Maharashtra Co-operative (PMC) Bank.

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Following allegations of financial irregularities at the bank, RBI imposed regulatory restrictions upon PMC Bank on September 23, including a withdrawal limit that was initially capped at ₹1,000 per day for each customer and was raised to ₹50,000 in November. Senior executives of the bank are among the arrested accused in the ₹6,670-crore fraud.

A division bench of justices SC Dharamadhikari and RI Chagla on Thursday dismissed petitions challenging the withdrawal limit imposed by RBI and described the allegations of the petitioners as “general and vague”. The bench said the banking regulator has issued the orders by exercising powers under section 35A of the Banking Regulation Act, 1949 in public interest and in the interest of both the bank and its depositors.

The petitioners challenging RBI’s directives included the Mumbai-based non-governmental organisation, Consumer Action Network. A joint petition was filed by a Wadala resident and a Sion Koliwada resident, both of whom had challenged the moratorium on the grounds of needing to withdraw large sums. The Wadala resident required the funds to pay for his daughter’s wedding while the Sion resident needed to make a large withdrawal to pay for a civil aviation course in which his son had enrolled.

RBI responded by saying the petitioners were under a misconception that PMC Bank had a substantial cash reserve. “They [depositors] do not know that the total net worth of the bank has gone in negative and about 29% deposit reserve of the bank has been wiped out,” said senior advocate VR Dhond, who represented RBI.

Dhond also maintained there was no institutional failure on RBI’s part.

He submitted that the restrictions imposed by RBI were protecting the interests of the bank and its depositors. “Ultimately, the effort is to monetise secured assets available with the bank and bring the cash to refund the deposits,” said Dhond.