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PMC Bank scam: Delhi HC notice to Centre, RBI on plea seeking guidelines to safeguard people’s money in cooperative banks

Depositors of the Punjab and Maharashtra Co-operative Bank (PMC) display placards during a protest over the Reserve Bank of India (RBI)'s curb on the bank, outside RBI headquarters. File

Depositors of the Punjab and Maharashtra Co-operative Bank (PMC) display placards during a protest over the Reserve Bank of India (RBI)'s curb on the bank, outside RBI headquarters. File   | Photo Credit: PTI

Petition also seeks a 100% insurance coverage for the money deposited in various cooperative banks

The Delhi High Court on Friday issued notice to the Central government and the Reserve Bank of India (RBI) on a public interest litigation (PIL) petition seeking to frame an exhaustive guidelines to safeguard money deposited by people in various cooperative banks across the country.

The petition, filed in the wake of the Punjab & Maharashtra Cooperative (PMC) Bank fraud crisis, has sought a direction to the government and the RBI to constitute a high-powered committee for looking into the complete affairs of the working of cooperative banks.

A Bench of Chief Justice D.N. Patel and Justice C. Hari Shankar sought the response of the authorities by January 22, the next date of hearing.

The petition, filed by social activist Bejon Kumar Misra, has also sought a 100% insurance coverage for the money deposited in various cooperative banks, including nationalised banks.

Mr. Misra had previously moved the Supreme Court with a plea for immediate protection of the depositors of the PMC Cooperative bank. The top court had disposed of the plea with a liberty to Mr. Misra to approach the High Court.

Curbs on withdrawal

The RBI has put restrictions on the operations of the scam-hit PMC Bank, including restrictions on withdrawal limits, after an alleged fraud of ₹4,355 crore came to light. A preliminary enquiry revealed that PMC Bank issued over 70% of its total loans to Housing Development Infrastructure Limited.

Mr. Misra stated that the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI, did not provide for 100% insurance to all types of deposits such as savings deposit.

“There are the other areas like the government and interbank deposits are also not covered under the said Act [DICGC Act]. It is further submitted that deposits of State land development banks with State cooperative banks are not covered under the said Act,” the plea said.

He argued that the “most glaring lacuna in the insurance cover in the banking is the limit of insurance is caped at ₹10,0000 only for both principal and interest and this policy has been there for the last 26 years”.

Highlighting that there was no financial protection to the depositors in case of such financial crisis, the plea sought an immediate amendment to the existing laws and appointment of an effective single regulator to protect the interest of the depositors of cooperative banks.

It has also pointed out that thousands of depositors across the country were grappling with financial hardships due to the restriction imposed by the RBI on withdrawal of their own money.

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Printable version | Feb 27, 2020 8:43:00 PM | https://www.thehindu.com/news/national/pmc-bank-scam-delhi-hc-notice-to-centre-rbi-on-plea-seeking-guidelines-to-safeguard-peoples-money/article29852461.ece

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