No increase in limit of repayment, says RBI

The Reserve Bank of India (RBI) on Friday ruled out any increase in limit of repayment to depositors of Madhavpura Mercantile Co-operative Bank Ltd (MMCB) in excess of the present one-time payment of Rs 1,000 irrespective of amount deposited. It also said the report on revival of the bank will come out next week.

RBI regional directors V S Das told reporters that he had received a recommendation from MMCB administrator S Ramachandran suggesting
increase in repayment amount. "But that is not possible looking into the
bank’s financial condition," Das said.

He said the MMCB revival would be worked out only after the advisory committee report was made available next week. Das said it was difficult to preempt the
MMCB fraud because even as its advances showed steep rise between
December 2000 and March 2001, they were shown as secured industrial loans
as clean advances, he said while explaining the RBI failure in detecting the cheating.Allaying fears of individual deposits Das said no one with deposits of up to Rs. one lakh was going to lose and that talks for MMCB were taken up seriously at various levels.

The RBI was also coining out with a 'liquidity' facility scheme under which 90 days temporary accommodation (credit) will be offered to scheduled banks via Gujarat State Co-operative Bank when they asked for the same, he said Scheduled banks could fund in turn other Co-operative banks which did not come directly under its purviews lie said. I-Ic announced the period of RBI inspection had now been reduced from three to two years in case of good banks and it would be an annual scrutiny in case of weak banks.

About the misgivings on ban of premature withdrawals, Das said RBI had not issued any direct live or instructions but only 'reiterated the previous advice' this week to avoid run on banks, He said decisions to allow premature encashment. was left to the banks individual prudence. He Said there was no time—limit on present ban.

Republished from Indian Express