RBI SPIKES ONLINE BUZZ

Determined to quash social media rumours about bank closures, a day after the regulator clamped restrictions on the Punjab and Maharashtra Co-operative Bank, the RBI was obliged to allay misgivings by issuing a statement.

‘‘Reports appearing in some sections of social media about RBI closing down certain commercial banks are false," the Reserve Bank said in Twitter message on Wednesday.

Finance Secretary Rajiv Kumar also felt obliged to tweet that the social media messages were "mischievous" and pointed out that the government was in process of strengthening public sector banks by infusing capital. He also described the PSU banks as articles of faith.

This is the second time in less than two years that policy makers have had to publicly come out in support of banks. The social media messages had named nine banks which were allegedly on the brink of closure -- the Corporation Bank, the IDBI, the Bank of Maharashtra, the UCO Bank, the Andhra Bank, the Indian Overseas Bank, the Central Bank of India, the Dena Bank and the United Bank of India.

Even as the RBI issued a clarification, it was apparent that there are many jittery investors who are worried about their money in public sector banks. The lingering NPA issue, the liquidity crunch and the economic slowdown have heightened the sense of alarm in some quarters.

To add to the sense of gloom, there was a global market sell-off on the back of US impeachment crisis coupled with fears of fresh banking sector bad loans. Result: Profit booking led to a sharp decline in the equity markets; both the key indices -- the S&P BSE Sensex and the NSE Nifty50 -- declined by over 1 per cent. Incidentally, most of the banks named in the messages were those that have been either merged with other banks or are in the process of being merged.

Last month, the government had announced that 10 public sector banks would be merged into four.