The Reserve Bank of India as well as the finance ministry on Wednesday refuted social media messages that nine commercial banks were to be shut down soon.
“Reports appearing in some sections of social media about RBI closing down certain commercial banks are false,” the central bank said in a tweet.
There were messages circulating on social media and messaging platforms stating that nine banks—Corporation Bank, UCO Bank, IDBI, Bank of Maharashtra, Andhra Bank, Indian Overseas Bank, Central Bank of India, Dena Bank and United Bank of India—will be permanently closed by the RBI.
The messages further stated that if anybody had any transactions with the banks then they should withdraw it and the banks were being closed on order by Supreme Court.
“There are mischievous rumours on social media about RBI closing some banks. No question of closing any public sector bank, which are articles of faith. Rather, government is strengthening PSBs with reforms and infusion of capital to better serve its customers,” Rajeev Kumar, finance secretary, said separately.
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Such rumours of certain public sector banks being shut surfaced in the past too when the RBI had put several of the state-owned banks under its prompt corrective action (PCA) framework due to a sharp rise in non-performing assets. There are several restrictions imposed on banks under PCA framework, including on branch expansion and restriction on management compensation.
Six of the PSBs have since moved out of the PCA watchlist after they received fresh capital injection from the government.
The latest rumours on bank closures come just a day after RBI imposed restrictions on Mumbai-based Punjab and Maharashtra Co-operative Bank (PMC Bank) under Section 35A of the Banking Regulation Act.
As per the directions, depositors of PMC Bank will be allowed to withdraw only Rs 1,000 of the total balance in every savings bank account or current account. The bank will also, without any prior approval in writing from RBI, not be able to grant or renew any loans and advances, make any investment, incur any liability including borrowing of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets.
Huge crowds were seen at PMC Bank branches after the restrictions imposed by RBI created panic among the bank’s customers, many of whom had a large part of their savings in the bank.
Reports suggest that under-reporting of NPAs was probably one of the reasons behind RBI’s move to impose restrictions on PMC Bank.
In an interview with a TV channel, PMC Bank’s managing director Joy Thomas said that the RBI action was harsh and the bank had ample assets to cover all the liabilities of the depositors.
The RBI said in its notification that its action on the bank should not be construed as cancellation of banking licence.
“The bank will continue to undertake banking business with restrictions till further notice/instructions. The Reserve Bank may consider modifications of these directions depending upon circumstances,” it said.