Won’t let cooperative bank to collapse: RBI Governor Shaktikanta Das

Das added that every incident ‘is an experience’ based on which the RBI will take a fresh look at the regulatory framework in existence and take up any required changes with the government.

The Reserve Bank of India governor, Shaktikanta Das, on Friday said no co-operative bank would be allowed to collapse, even as he appealed to members of public and depositors not to panic or believe speculation in the context of the recent PMC Bank collapse.“The Indian banking sector remains sound and stable. And there is no reason for any unnecessary panic,” Das said after the Monetary Policy Committee meeting. “RBI, obviously, cannot allow a co-operative bank to collapse. The discussion with the government with regard to regulatory provisions of co-operative banks is an ongoing process.”

Das added that every incident ‘is an experience’ based on which the RBI will take a fresh look at the regulatory framework in existence and take up any required changes with the government. However, he also stated that “one incident should not be used to generalise about the health of the co-operative banking sector.”

On September 23, the central bank put regulatory restrictions on Punjab & Maharashtra Cooperative (PMC) Bank after it found financial irregularities and under-reporting of loans. Soon after, it also superseded the bank’s board to appoint an administrator.

The crisis at PMC Bank is understood to have been precipitated as it was funding a clutch of companies, mainly in the troubled real estate sector. Housing Development & Infrastructure (HDIL) was one of these companies. Earlier
this year, HDIL was dragged to the insolvency tribunal by Bank of India to recover its loans. Later, HDIL arrived
at a settlement with the bank to stay out of NCLT.

The restrictions included barring the bank from lending and accepting fresh deposits for the next six months apart from capping withdrawals at Rs 1,000 per account, which was later revised upwards to Rs 10,000 and then to Rs 25,000 on Thursday.