'We are setting up small finance bank which will take over PMC Bank': RBI in Delhi HC

The Reserve Bank of India (RBI) on Monday said that it has given "in-principle" approval to one Centrum Financial Services Ltd (CFSL) to set up an all finance bank (SFB), which will take over the beleaguered Punjab and Maharashtra Cooperative Bank (PMC Bank) very soon. After the submission, Senior Counsel Jayant Mehta representing RBI sought time to file an affidavit in this regard.

RBI: 'In process to set up small finance bank'

After taking note of the submission on behalf of the RBI, the Bench of Justice DN Patel and Justice Jyoti Singh adjourned the matter for August. Meanwhile, advocate Shashank Deo Sudhi, who appeared for the petitioner submitted that more than 5 dates have been given and the hardship money has not been released. 

Shashank Deo Sudhi further submits that the common depositors are condemned to lead humiliated life without any money at the time when the depositors are in the need of money. The interim application was filed in the pending petition filed by Bejon Kumar Misra, challenging withdrawal limits in Punjab and Maharashtra Cooperative (PMC) Bank.

Earlier, RBI in a response filed in Delhi High Court stated that depositors are already allowed to withdraw up to Rs 5 lakh on hardship grounds for treatment of terminal illnesses, including treatment of COVID-19. RBI said, "It is the duty of Punjab Maharastra Cooperative (PMC) to pay hardship amount to the eligible depositors as per directions of RBI and subject to availability of liquidity with that bank. To expedite the process, the authority for approving the payment under hardship grounds has also been delegated to the PMC Bank."

Earlier, Delhi High Court had directed the Reserve Bank of India (RBI), Punjab Maharashtra Cooperative Bank and other respondents to consider the needs of the depositors during the coronavirus-induced lockdown. The RBI had capped the deposit withdrawal limit at Rs 40,000 and restricted the activities of the PMC Bank after an alleged fraud of Rs 4,355 crore came to light. The Enforcement Directorate (ED) has seized and identified movable and immovable assets worth more than Rs 3,830 crore owned by HDIL in connection with the case.

What is the PMC Bank scam? 

The police registered a First Information Report (FIR) against the top officials of the PMC Bank and the promoters of the HDIL. According to the prosecution, the bank continued giving loans to the debt-ridden HDIL from 2008 to 2019 despite the previous loans not being repaid. This caused a loss of approximately Rs.4,355 crore.

Several sections of the Indian Penal Code (IPC) such as criminal breach of trust, cheating, and forgery have been invoked against the accused. Besides HDIL promoters Sarang and Rakesh Wadhawan, the former Managing Director Joy Thomas and ex-Chairman Waryam Singh were arrested and sent to police custody. Out of 44 accounts, a total of 10 were linked to HDIL.

These included the personal bank accounts of the accused. The RBI appointed former Union Bank of India executive A K Dixit as the new administrator of PMC Bank. In another letdown for the depositors, India's Central bank has extended the moratorium on the PMC Bank till March 31, 2021. Until now, the bank has received at least 4 Expressions of Interest (EoI) for investment or equity participation in its reconstruction.

(Image: PTI, Unsplash-Representative)