Finance Minister Nirmala Sitharaman faces angry Punjab & Maharashtra Cooperative Bank depositors

Mumbai: Finance Minister Nirmala Sitharaman, who faced angry depositors of scam-hit PMC Bank here on Thursday, announced setting up of a panel to recommend legislative changes to ensure better governance at co-operative banks.

If necessary, the government will amend the laws governing cooperative banks in the winter session of Parliament, she said.

After a Rs 4,500-crore scam came to light at Punjab & Maharashtra Cooperative Bank, the Reserve Bank, which put curbs on withdrawal of funds from the bank, had also said that it would examine if the regulatory framework needed tweaks.

Sitharaman said a committee of secretaries of Economic Affairs and Financial Services, Rural Affairs and Urban Development ministries and a deputy governor of the RBI would be formed.

Through this committee, the government intends to "understand and take necessary legislative steps to prevent such things from happening in the future, empower the regulator better," she said. Stating that she is not presuming that there are shortcomings in the present laws, the minister said the panel will study the issue and "if necessary, in the forthcoming winter session of Parliament itself, we will be bringing in any amendments which may be necessitated." Concerns exist about cooperative banks often becoming fiefdoms of politicians or other influential persons, giving a go-by to banking regulations and leading to soaring of bad loans and putting in peril depositors' money. Many cooperative banks have failed in the last two decades, and PMC Bank is among the largest such banks.

After the scam came to light last month, the RBI capped withdrawals from the bank at Rs 1,000 and later increased it to Rs 25,000 following protests by depositors. The bank had allegedly lent over 70 per cent of its Rs 9,000 crore in loans to near-bankrupt realty player HDIL. Irate depositors gathered outside the BJP's office in south Mumbai ahead of Sitharaman's press conference. When she arrived, they shouted slogans, demanding that their money should be returned to them.

Sitharaman and a few of the depositors went inside and had a brief conversation. "I heard them about their problems and explained to them that multi-state cooperative banks are regulated by the RBI," she later said, adding that the government's role is limited. But she assured that she will speak to RBI Governor Shaktikanta Das and convey the "urgency and distress" of the depositors. When asked when the depositors can get their money back, she said it was a process-driven exercise between RBI and the bank administrator appointed by the RBI.

"But, I can emphasise that it has to be done quickly," she said. Harbans Singh, a bank customer, told reporters that the depositors expected the minister to give an assurance that their money was safe, but they were disappointed. "Sixteen lakh depositors are in distress. What is our fault? You have got Rs 4,000 crore assets. Sell it and start the bank and then go ahead with whatever action you want against the accused," he said. (PTI)After a `4,500-crore scam came to light at Punjab & Maharashtra Cooperative Bank, the RBI capped withdrawals from the bank at `1,000 and later increased it to `25,000 following protests by depositors. Irate depositors gathered outside the BJP's office in south Mumbai ahead of Sitharaman's press conference on Thursday