There was a restriction which was imposed on Punjab and Maharashtra Cooperative Bank by The Reserve Bank of India, last year, which resulted in a protest from common people who have an account over there. It was said by the regulator that bank shall be barred from the business transaction and limitation on the depositors to withdraw 1,000 rupees from the account. Eventually, they will not be permitted to take accept deposits, grant loans and any form of investments. The story behind this scam, promoters of HDIL colluded with the management of the bank to draw loans from the branch of Bandup but the officials did not provide that those were non- performing advances despite non-payment. Furthermore, the report did mention about the exposure or total amount of unsecured loans which were there, in the name of the promoter of HDIL was around 6500 crores or 70 per cent of bank advances. Consequently, the bank did open fake accounts for HDIL were small loans were provided to them but they weren’t been serviced in the manner required and conventional forged accounts to veil from regulatory supervision.
The Banking Regulations Act, 1949:-
The restrictions on the cooperative bank came from the section 35A of the Banking Regulations Act, 1949 which mentions about the power given to the Reserve Bank of India to give directions.
- In the public interest
- The interest of banking Policy
- An act of banking company which are detrimental to the interests of the depositors or in a manner which shall prejudicial to the interests of the banking company.
- Securing proper management of the banking company and issue required directions to bank companies generally or bank company in particular. The directions can be provided to such bank companies in time to time and will be bound to follow the directions.
The Reserve Bank of India on representation can modify the directions which have been provided in the Sub-Section (1) of Section 35 A of this Act and conditions may be imposed.
Managing Director of the Cooperative bank did take the complete responsibility of the problem which took place in the bank and promised to rectify within six months.
- Banks operations started in the year 1983.
- Fictious account was formed to hide 4335 crores which were lend to HDIL.
- Defaulters have been kept in Arthur road jail.
- RBI has enhanced the withdrawal limit up to 50,000 rupees.
- Deposit base is 11,617 crore as of March 2019, which can be considered as a large cooperative lender.
Courts orders on this case:-
The relief was given by The Bombay High Court to depositors were, it mentioned on the PIL which seek to auction those properties which are mortgage with the bank or attached with Economics Offence Wing, Mumbai. The division which consists of Justice Ranjit More and Justice SP Tavade approved for the appointment of 3 member committee which shall be headed by the Justice S Radhakrishan to dispose of the property of HDIL. The report needs to be submitted to the bench by 30th April 2020. During that time, Wadhwans has been ordered by the bench to remain under house arrest with four guards for security and oblige in the process of recovery.
Contrary, the Bench consisting of Chief Justice SA Bobde, Justice BR Gaval and Justice Surya Kant took the note of the submission made by the Solicitor-General of India Tushar Mehta to the order of house arrest given to the Wadhwans by Bombay High Court. The law officer did maintain that the release of Wadhwans was unusual, which need to be restricted as it would be bail for them in the case related to 7000 crores fraud. Thereby, the bench gave a partially stayed the order made by the bench consisting of Justice More and Justice Tavade.
Edited by J. Madonna Jephi
Approved & Published – Sakshi Raje
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The Banking Regulations Act,1949