india

Updated: Sep 25, 2019 17:22 IST

A day after the Reserve Bank of India put restrictions on Mumbai branches of Punjab and Maharashtra Co-operative Bank Ltd (PMC), the government dismissed reports that several public sector banks would shut shop saying there was ‘no question’ of doing so .

“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,” Finance Secretary Rajeev Kumar said.

The RBI also tweeted that that all such reports were false. “Reports appearing in some sections of social media about RBI closing down certain commercial banks are false,” the central bank said.

The RBI, on Tuesday, barred PMC from granting or renewing any loans and advances, making any investment, incurring any liability including borrowing of funds and acceptance of fresh deposits or disbursing any liabilities without the prior approval from the RBI. Customers were barred from withdrawing more than Rs 1000, which triggered a panic situation with worried account holders flocking to branches for information.

According to sources, gross underreporting of bad loans is one of the primary reasons behind RBI restrictions. The bank’s management has come clean and the central bank has therefore put restrictions on withdrawals as a precautionary measure to avoid a run on the bank. While the bank’s gross bad loans, as per its FY19 annual report, was at 3.76% of its advances, the bank has now disclosed that it is much higher, the source added, reports livemint.com.

