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RBI Objects Fund Withdraw

Amidst a statewide hue and cry over the State Government’s money being parked in the cash starved Yes Bank facing moratorium, the Reserve Bank of India Thursday urged Odisha Government not to withdraw deposits from the private sector banks.

“…We, therefore request you to reconsider any decision you might have already taken or are in the process of taking to withdraw/ transfer funds deposited by the state government and its entities under jurisdiction in private sector banks,” RBI Deputy Governor NS Vishwanathan wrote to Odisha Chief Secretary Asit Kumar Tripathy.

The letter came to Odisha Government barely some hours after the State Administration was criticized for parking public money in private sector banks including Yes Bank.

The Opposition BJP and Congress Members have demanded that the State Government should immediately withdraw all its deposits in private sector banks.

However, the RBI Deputy Governor in the letter mentioned that apprehension on safety of deposits in private sector banks I highly “misplaced” and such reactive decision will not be in the interest of stability of financial system in general and banking in particular.

It has been observed from certain reports that some of the State Governments have advised government bodies and their entities under their jurisdiction to transfer their funds held with private sector banks to public sector banks, the letter said adding that it is also learnt that a few other state governments are contemplating similar action.

“We strongly believe that such a move can have banking and financial sector stability implication. We would like to point out that the Reserve Bank of India has adequate powers to regulate and supervise the private sector banks and by using these powers it has been ensured that the depositors’ money is entirely safe,” the RBI Deputy Governor told to Odisha Government in the letter.

It is pertinent to mention that the resolution of weak private sector banks in the past has been done in a manner that the depositors are not put to loss, the letter said adding that it is precisely with a view to retaining depositors’ confidence in private sector banks and mitigating their hardship that after the imposition of moratorium on Yes Bank Limited, the RBI has drawn upo a draft scheme without any delay and we are making every efforts to expedite the finalization of the scheme, the letter said.

Earlier in the day, Finance Minister Niranjan Pujari has informed the Assembly that the State Government has urged the Centre to transfer Lord Jagannth’s fixed deposit from Yes Bank to any Nationalized Bank.



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