Rupee Bank in cash trouble, RBI curbs withdrawals
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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.
The bank had been hauled up for alleged mismanagement earlier by the co-operative commissioner. In 2002, the co-operative commissioner dissolved the bank's board of directors and had posted an administrator to oversee the bank's activities.
The news of the RBI action unsettled depositors, many of who had gone to the ATMs to withdraw money. City based businessman Sandeep Khardekar said instead of its "knee-jerk reaction", the RBI should have taken steps to prevent the movement of money of depositors.
"In the Paud Road branch of the bank, I have quite a good amount, which I was planning to use to pay service tax. With the deadline for payment of service tax nearing, the RBI restriction has upset my plans and I would have to make alternate arrangements, which would be difficult," he said.
He said the RBI should have issued corrective guidelines earlier that could have avoided such drastic steps.