Will bring in legislation to avert PMC Bank-like crisis: Sitharaman

Mumbai: Finance Minister Nirmala Sitharaman promised the irate depositors of Punjab and Maharashtra Co-operative (PMC) Bank on Thursday that the government will bring in legislative changes for upholding their interests and preventing PMC Bank-like crisis. The PMC Bank depositors had gathered outside the Bharatiya Janata Party's (BJP) office in Maharashtra ahead of Sitharaman's scheduled press conference in the run up to the October 21 state Assembly elections.

'Will take steps to prevent PMC Bank-like crisis'

At the press conference, Sitharaman said that secretaries from the department of financial services and economic affairs will be meeting a deputy governor of Reserve Bank of India (RBI) soon. "They will discuss legislative steps needed to prevent such incidents from happening and empower the regulator better," the minister said.
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They will also examine the "shortcomings" of the functioning of multi-state cooperative banks and see if any amendments can be made to the laws, she said. The BJP government will bring in a legislation to this effect in the Winter Session of Parliament, Sitharaman added.

'RBI looking into the matter'

The Finance Minister told the depositors that the RBI is looking into the matter. She added that she will speak to RBI Governor Shaktikanta Das about the interest of the depositors and convey their distress and the urgency to find a resolution.

The backdrop

The RBI imposed severe restrictions on Mumbai-based PMC Bank last month and barred the bank from carrying out the bulk of its routine business transactions for a period of six months. "The issue of the directions by the Reserve Bank should not, per se, be construed as a cancellation of its banking licence. The bank will continue to undertake banking business with restrictions till further notice/instructions," the RBI said in a notification.

RBI limited withdrawals from the bank at Rs 10,000 and banned the bank from carrying out any lending activities for the next six months. Such restrictions are placed on banks if the RBI finds that withdrawals are beyond the prescribed threshold in any given period. The curbs are placed to protect the interest of small depositors.