HC Junks PMC Bank Depositors’ Plea for Lifting of Restrictions

Image used for representational purposes.

(Photo: iStock / Altered by The Quint)

The Bombay High Court on Thursday, 5 December dismissed pleas of the depositors of the crisis-hit Punjab and Maharashtra Cooperative (PMC) Bank, seeking lifting of restrictions imposed by the Reserve Bank of India (RBI) on cash withdrawals.

The petitions were filed by persons claiming to be the depositors and account-holders of PMC Bank.

In their pleas, the petitioners alleged that the RBI's decision (to put restrictions on cash withdrawal) was irrational, arbitrary and violative of the fundamental rights of common public.

The division bench of Justices SC Dharmadhikari and RI Chagla dismissed the pleas, saying the allegations made against the RBI were “vague”.

“In dismissing them, we hold that RBI was rightly satisfied and acted reasonably to ensure that there is no prejudice caused and to ensure timely withdrawal of funds,” the court observed.

Earlier, the RBI had told the court, in response to the petitions, that such measures were necessary to safeguard the interest of the bank and its depositors.

The apex bank had also stated that a large-scale wrongdoing was found in the PMC Bank. RBI counsel Venkatesh Dhond had told the court that depositors facing hardships can approach the RBI-appointed administrator and seek withdrawal up to Rs 1 lakh.

On 23 September, the RBI had imposed regulatory restrictions on the PMC Bank for six months over alleged financial irregularities.

The withdrawal limit for account holders was initially Rs 1,000 per each customer for six months, which was later raised to Rs 10,000 and is now presently at Rs 50,000.

The crisis at the bank is attributed to the loans allocated to realty firm- Housing Development Infrastructure Ltd (HDIL)- without scrutiny. These loans later turned into non-performing assets (NPAs).

The Mumbai police's Economic Offences Wing (EOW), which is probing the alleged Rs 4,355-crore PMC Bank scam, have arrested 12 persons, including four top bank officials and two promoters of HDIL- Rakesh and Sarang Wadhawan- apart from auditors.

The EOW suspects a nexus between some of the accused and the realty group HDIL, whose mammoth loan defaults are said to have caused a liquidity crisis at the bank, leading to appointment of an administrator by the RBI and restrictions on withdrawal of funds.