The RBI said the move is aimed at "reducing the hardship" of PMC Bank depositors.

Two major unions in the banking sector have urged Finance Minister Nirmala Sitharaman to make Reserve Bank of India (RBI) accountable for the problems in Punjab & Maharashtra Co-operative (PMC) Bank.

The two unions are - All India Bank Employees' Association (AIBEA) and All India Co.Op. Bank Employees Federation (AICBEF).

In a letter to Ms Sitharaman on Wednesday the two unions said the RBI's instruction restricting the withdrawal of money by the depositors of Punjab & Maharashtra Co-op. Bank (PMC Bank) has resulted in a panic in the minds of customers in particular and banking public in general.

"All Banks are directly under the supervision and monitoring of the RBI. Hence, the RBI has miserably failed to take timely preventive action in this non-declaration of the default as NPA (non performing asset) by the PMC Bank," the unions said.

"Hence, the government should take a serious view and make the RBI accountable for this sad episode where the general banking public have been affected without any fault on their part. Stern action should be taken on the officials in the RBI who are responsible for this serious lapse," they added.

According to the unions, RBI and the government should take criminal action on the top management of the PMC Bank for not classifying the huge loan given to Housing Development Infrastructure Ltd. (HDIL).

"But unfortunately, instead, the innocent customers of the Bank are being punished now with the RBI's ban instructions limiting the withdrawal to Rs 1,000. This is really unfair and obnoxious on the part of the RBI to do so," the unions told Ms Sitharaman.