Rupee Bank in cash trouble, RBI curbs withdrawals
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The Reserve Bank of India (RBI) on Saturday imposed restrictions on the Pune-based Rupee Co-operative Bank, and put a ceiling on the amount that an account-holder can withdraw, causing consternation among depositors who queued up before ATMs.
The restrictions would last six months.
The bank described the RBI action as "unfortunate" and urged it to reconsider the decision.
"The RBI action is unfortunate..." said Nitin Kotwal, director of the bank. "The bank was in sound financial health and we hope the RBI reconsiders its decision."
RBI took the action Under the Banking Regulation Act. Such restrictions can be put on banks by the RBI to protect the financial health of the bank and interest of depositors.
The restrictions would be operational for six months, during which depositors would be allowed to withdraw only Rs 1,000 a month.
Kotwal said unsatisfactory loan recovery had invited the RBI action.
"Loans to the tune of Rs 350 crore are liabilities from the past. Some loans were given without proper security and in some cases, court stays are preventing us from recovering them," he said. Such loans were given by the past board of directors, Kotwal said adding that some big names are among those refusing to repay.
He added that the present financial condition of the bank was sound and the bank had a liquidity of Rs 200 crore.
"We hope the RBI reconsiders its restrictions and lift them well before the six months' time. We are going to meet officials concerned in Mumbai either on Monday or Tuesday to discuss it in detail and ask for reconsideration," he said.
The bank, according to Kotwal, has fixed deposits to the tune of Rs 1700 crore at present.
Kotwal said many of the depositors had come to various branches of the bank on Saturday to enquire about their money and had tried to withdraw money from the bank.