Heavy protests by bank customers have led the Reserve Bank of India to modify its original restrictions placed on a cooperative bank with 137 branches across India. The central bank had limited customer withdrawals to only 1,000 rupees (approximately $14) per account for six months.
India’s central bank has issued another circular regarding Mumbai-based Punjab and Maharashtra Cooperative Bank (PMC Bank) Ltd. The first one, dated Sept. 24, puts PMC Bank under regulatory restrictions, including limiting customer withdrawal limit to 1,000 rupees (~$14) per account for six months. As customers protested heavily at PBC Bank branches, the RBI responded by issuing a follow-up circular to relax the imposed withdrawal limit. The new RBI circular, dated Sept. 26, states that the central bank “has decided, in the interest of depositors, to review the directions,” elaborating:
It has been decided to allow the depositors to withdraw a sum not exceeding ₹10,000/- (rupees ten thousand only) (including ₹1,000/- wherever already withdrawn) of the total balance.
The total balance in question is one “held in every savings bank account or current account or any other deposit account by whatever name called, subject to conditions stipulated in the RBI Directive dated September 23, 2019,” the RBI clarified. “Other terms and conditions of said directive shall remain unchanged,” including granting or renewing any loans and advances, making investments, and incurring any liabilities including borrowing funds or accepting new deposits, the central bank noted.
The RBI cited “major financial irregularities, failure of internal control and systems of the bank and wrong/under-reporting of its exposures under various off-site Surveillance reports” as the reasons for putting PMC Bank under regulatory restrictions, NDTV reported.
The move by the central bank to limit withdrawals to only 1,000 rupees (~$14) led to multiple protests by customers and long queues outside of PMC Bank branches. According to local media, the bank currently has 137 branches in multiple states across India. In its circular, the central bank stated that “With the above relaxation, more than 60% of the depositors of the bank will be able to withdraw their entire account balance,” adding:
The above relaxation has been granted with a view to reducing the hardship of the depositors.
PMC Bank customers are reportedly worried about their life savings. “My money is gone now,” one customer told NDTV, convinced that he would not be able to access his savings. He was not alone, as thousands of customers stood outside various branches, demanding answers about their life savings, the news outlet detailed. “We need money urgently for the medical surgery of my mother-in-law and we can’t withdraw our own money,” one customer exclaimed.
According to the news outlet, over two dozen of cooperative banks are now under RBI administration, but PMC Bank is by far the largest one to receive such restrictions. The bank had deposits of Rs. 11,617 crore (~$127 billion) as of March 31.
Joy Thomas, Managing Director of PMC Bank, attempted to reassure customers, stating that “All efforts are being made to remove the restrictions by rectifying the irregularities … As the M.D. of the bank, I take the responsibility and assure all the depositors that these irregularities will be rectified before the expiry of six months.” Sonia Malik, a branch manager at a PMC Bank in Delhi, said that the bank’s employees were worried about their jobs, adding that “Our staff has worked hard to win the confidence of clients over the years. After this incident, it’ll be very difficult to revive that confidence.”
The central bank has also placed banking restrictions on all banks, prohibiting them from providing services to crypto businesses. The ban went into effect in July last year, causing a number of crypto businesses to shut down. A number of industry stakeholders have filed writ petitions with the country’s supreme court to challenge the RBI ban. After repeated delays, the court is scheduled to resume hearing this week.
What do you think of the RBI’s attempt to alleviate the situation for customers of PMC Bank? Will 10,000 rupees be enough? Let us know in the comments section below.
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A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.