Earlier today we posted a tweet from the Reserve Bank of India (RBI) reassuring the country the banking system is safe. Concerns come from a recently uncovered $915 million fraud case and have led the RBI to limit withdrawals, sparking protests outside its offices. 

MUMBAI, Oct 1 (Reuters) - Punjab and Maharashtra Co-operative Bank (PMC) used more than 21,000 fictitious accounts to hide loans it made, according to a police complaint lodged by Indian officials, in the latest banking fraud case to spook the country's depositors and investors. The complaint, filed with the Economic Offences Wing (EOW) of Mumbai Police on Monday and later seen by Reuters, accuses the bank's management of concealing non-performing assets and disbursing loans leading to a loss of at least 43.55 billion rupees ($915.5 million).

"The actual financial position of the bank was camouflaged, & the bank deceptively reflected a rosy picture of its financial parameters," said the complaint, noting that the fictitious loan accounts were not entered into the bank's core banking system - a factor key in the perpetration of a $2 billion fraud at Punjab National Bank that was uncovered in 2018.

The PMC case has sparked renewed concerns about the health of India's troubled banking sector, which has been rocked by a multi-billion dollar fraud at a state-run lender, the collapse of a major infrastructure lender, bad loan issues at state-run banks and a liquidity squeeze that has hit shadow lenders. The RBI last week moved to take charge of PMC, one of India's top five co-operative lenders with more than 900,000 depositors, and suspended managing director Joy Thomas and the bank's board after uncovering lending irregularities

The RBI has barred the bank from renewing or granting any loans or making investments without prior approval of the central bank, while depositors have been informed they can only withdraw a maximum of 10,000 rupees ($140) from their PMC accounts over the next six months. Dozens of account holders gathered outside an RBI office in Mumbai on Tuesday to protest against the curbs and demand that the central bank and government intervene to release their funds.