Gujarat HC asks RBI if it has power to ban DCCB transactions

The Gujarat High Court today asked the Reserve Bank of India (RBI) whether it has powers to ban transactions at district central cooperative banks (DCCB) or restrict withdrawals following demonetisation.
A division bench of Chief Justice R Subhash Reddy and Justice V M Pancholi, while hearing two PILs challenging legality of demonetisation as well ban on such banks, sought response from RBI as well as from the Centre by tomorrow.
These PILs were filed last week by Gujarat Khedut Hitrakshak Samiti and Bhavnagar District Cooperative Bank (BDCB). Both the petitioners also sought quashing of the notification dated November 8 declaring demonetisation of currency notes of Rs 500 and Rs 1000.

Appearing for Bhavnagar District Cooperative Bank, advocate Babubhai Mangukiya argued that RBI's decision to ban DCCBs from exchanging defunct notes and restricting account holders, mainly farmers, from withdrawing cash beyond Rs 10,000 is "ultravires", as such decision can be taken only by the Centre and not by the RBI.
He further argued that even if demonetisation is considered a legal step, both RBI as well as Centre have no power to restrain anyone from withdrawing their own money lying in their bank accounts.
In it's petition, Bhavnagar District Cooperative Bank stated that restriction on dispensing short term loans to farmers has broken their line of finance for raising crops, because of which "farmers would be ruined and they would not be able to purchase seeds, fertilisers, pesticides and other items".

It further claimed that DCCBs should be treated on par with any other bank as per the RBI guidelines.
Another petitioner Gujarat Khedut Hitrakshak Samiti raised the question on legality of Centre's decision to demonetise Rs 500 and Rs 1000 currency notes, saying it cannot be carried out merely on the basis of a gazette but an Act is required to be passed through Parliament.
Citing the example of demonetisation carried out in 1978, the petitioner said the then Morarji Desai government had issued an ordinance and passed an Act in Parliament to make currency notes of Rs 1000, Rs 5000 and Rs 10,000 illegal.