India's banking system safe and stable, no need to panic on basis of baseless rumours, RBI assures people

  • This is for the second time within a week the RBI issued a statement assuring people about stability of the country's banking system

  • The Nifty Bank index plunged 1,026 points during the intraday trade to 28,077.35 on Tuesday

  • On 25 September, rebutting social media rumours, the central had said no commercial banks were going to be shut

Following rumours that emerged from certain corners about some banks including co-operative banks, the Reserve Bank has assured the people that the banking system in the country is safe and stable. The central bank also said that there is no need to panic on the basis of such rumours.

This is for the second time within a week the Reserve Bank of India (RBI) has come out with a statement assuring people about the stability and safety of the country's banking system.

The RBI's latest statement through a tweet came on the day when the Nifty Bank index plunged 1,026 points during the intraday trade to 28,077.35 on Tuesday. However, it recovered sharply and ended the day at 28,725.50, down only 378 points.

 Indias banking system safe and stable, no need to panic on basis of baseless rumours, RBI assures people

Representational image. Reuters.

"There are rumours in some locations about certain banks including cooperative banks, resulting in anxiety among the depositors. RBI would like to assure the general public that Indian banking system is safe and stable and there is no need to panic on the basis of such rumours," the RBI tweet said.

On 26 September also, the central bank had come out with a statement in order to pacify the people after baseless rumours were being circulated in sections of social media about operations of banks to create panic among the public.

"All are advised not to fall prey to such baseless and false rumours," it had tweeted then.

On 25 September, rebutting social media rumours swiftly, the Reserve Bank had said no commercial banks were going to be shut.

Finance secretary Rajiv Kumar described such social media messages as "mischievous" saying the government was in process of strengthening public sector banks by infusing capital in them.

"Reports appearing in some sections of social media about the RBI closing down certain commercial banks are false," the central bank said in a statement.

Messages are circulating in various social media platforms that nine banks will be closed down permanently by the RBI and appeals being made to the public to withdraw their money from them.

"No question of closing any #PSB, which are articles of faith. Rather Govt is strengthening PSBs with reforms and infusion of capital to better serve its customers," Kumar said in a tweet.

RBI action against PMC Bank triggers rumours

Rumours about the stability of the banking system started spreading after the RBI had imposed a slew of restrictions on Punjab & Maharashtra Cooperative
Bank (PMC Bank) on 24 September after finding many irregularities in its books, including massive under-reporting of NPAs.

The central bank placed the PMC Bank under Directions.

According to the Directions, depositors will be allowed to withdraw a sum not exceeding Rs 1,000 of the total balance in every savings bank account or current account or any other deposit account by whatever name called, subject to conditions stipulated in the RBI Directions.

On 26 September, the RBI hiked the withdrawal limits to Rs 10,000 giving a major respite to the worried account holders of the bank.

Police open probe into Lakshmi Vilas Bank 

On 27 September, creating yet another panic situation about the banking system, police opened a probe into the directors of private sector lender Lakshmi Vilas Bank after a customer accused them of misappropriating funds.

Indian financial services company Religare Finvest (RFL) had accused Lakshmi Vilas of misappropriating Rs 790 crore ($111.4 million) it kept with the bank as a fixed deposit, according to a copy of a complaint filed with the Economic Offences Wing of the Delhi police, reported Reuters.

“It appeared that there was a wider conspiracy to illegally misappropriate RFL’s funds and LVB was at the center of it,” said the complaint, which was filed against the directors of Lakshmi Vilas.

The directors face charges of cheating, breach of trust, misappropriation and conspiracy, Chennai-based Lakshmi Vilas said in a statement filed to the Bombay Stock Exchange and the National Stock Exchange of India, adding it was considering taking “appropriate legal measures.”

With inputs from agencies

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Updated Date: Oct 01, 2019 18:15:00 IST