Congress accuses RBI of systemic failure as regulator

The Congress on Friday accused the Reserve Bank of India (RBI) of 'systemic failure' in regulating the affairs of Punjab and Maharashtra Cooperative Bank and demanded the central bank should withdraw instructions to restrict withdrawals initially to Rs 1,000 per depositor over a period of six months.

Addressing a press conference here, Congress spokesperson Gourav Vallabh said that the multi-state urban cooperative bank has been placed under "directions" with effect from September 23.

"The Reserve Bank of India action on the Punjab and Maharashtra Cooperative Bank seems to be a systemic failure rather than an individual bank's failure," he said.

The Congress spokesperson said the RBI action has placed scores of depositors in the lurch and their hard-earned money was now under threat.

"Moreover, the swift manner in which the RBI decided to restrict withdrawals initially to Rs 1,000 per depositor over a period of six months and then increase the same to Rs 10,000 seems to suggest the RBI is clueless as to what the real issue is," he said.

The spokesperson said it is not a case related to one bank but will have a cascading impact and could affect the public sector banks as well.

Vallabh said the party had earlier stated how Rs 71,543 crore were lost in bank frauds in the last fiscal and this amount was just Rs 41,167 crore a year back.

"Now the new report of the first financial quarter (this fiscal) has come with 2,480 cases of financial frauds resulting in Rs 32000 crore loss of public money through public sector banks," he said.

"Is this a case of complete systemic failure? Is this only restricted to the cooperative banking system or the entire financial service industry? Can RBI emphatically state that this crisis is not going to affect the entire financial system," he asked.