Finance minister Nirmala Sitharaman (Mint file)
Finance minister Nirmala Sitharaman (Mint file)

Govt to set up panel to amend co-operative bank regulatory framework: FM

  • This comes in the wake of the recent developments at the Punjab and Maharashtra Co-operative (PMC) Bank
  • PMC Bank has allegedly enabled financial frauds amounting to Rs.6,500 crore by promoters of HDIL

New Delhi: Finance Minister Nirmala Sitharaman on Thursday said the government will set up a committee comprising two secretaries and a Reserve Bank of India (RBI) deputy governor to amend the cooperative bank regulatory framework. This comes in the wake of the recent developments at the Punjab and Maharashtra Co-operative (PMC) Bank Ltd.

PMC Bank has allegedly enabled financial frauds amounting to Rs.6,500 crore by promoters of Housing Development Infrastructure Ltd (HDIL), putting thousands of depositors and their money at risk. More than two-third of the bank’s total loan book has an exposure to HDIL.

“I have asked secretaries of my ministry -- economic affairs secretary and banking secretary--to work with rural development and urban development ministries to ensure that multi-state cooperatives, which also run banks to understand where there were shortcomings and look at ways in which different acts have to be amended," Sitharaman said at a press conference in Mumbai today.

The amended framework will be submitted in the upcoming winter session of the Parliament, Sitharaman said.

The crisis emerged after the RBI capped withdrawal limit for depositors of PMC Bank at Rs.1,000 in September. Faced with furore, the regulator later increased the withdrawal limit to Rs.10,000 and then to Rs. 25,000, allowing more than 70% of the depositors to withdraw their entire account balance.

However, fears of the bank shutting down have continued to worry the depositors.

To ease the concerns of depositors, Sitharaman assured that the she will talk to the RBI Governor Shaktikanta Das to permit smooth and restriction-free withdrawal of money from the bank.

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