State Bank of Sikkim in a spot

Pramod Giri, HT, 4 Dec 2016, SILIGURI: Inconvenience caused to its customers post-demonetisation has put a question mark on the functioning of State Bank of Sikkim (SBS) formed under royal proclamation much before the tiny country became the 22nd state of the Indian union in 1975. 

Many insist that SBS established in 1968 should continue to remain an autonomous body under the government of Sikkim protected under Article 371F of the Constitution. A section of people, political parties demand SBS be kept under the Bank Regulation Act and Reserve Bank of India.

Many old laws of Sikkim are protected by the Constitution. The SBS which is the treasury bank of the state could not exchange the old Rs 500 and Rs 1,000 notes after demonetization and was also unable to provide cash withdrawal facilities to customers. Some quarters including the main Opposition party Sikkim Krantikari Morcha (SKM) alleged that the black money was being stacked in SBS.

The inconvenience caused to SBS customers was because of the fact that it does not come under the purview of Banking Regulation Act 1949, said a RBI letter written to the state chief secretary.

SBS could have avoided the inconvenience had it been regulated by RBI, said the letter written by P Vijaya Kumar, chief general manager of RBI. Kumar also suggested that SBS be brought under the 1949 Act before March 31, 2017 “to avoid any inconvenience in future”. SBS being outside the Act was not authorised to exchange old notes with Rs 100 notes.

However, SBS, the state government and the ruling Sikkim Democratic Front (SDF) claim SBS is protected by Article 371F of the Constitution. It is therefore outside the purview of Bank Regulation Act and Reserve Bank of India, they said.

“If SBS is to be brought under RBI a Constitutional amendment will be required which in effect will dilute Article 371F of the Constitution,” said SDF.

SBS is wholly owned undertaking of the Government of Sikkim. The bank has 41 branches in the state and commands a large customer base. Phurba Wangdi Bhutia, chief general manager of SBS, said, “SBS is one of the cleanest banks in the country and rumours about depositing black money in the bank are totally baseless.”

“SBS has sufficient balance of money and there is no need to worry about the safety of its deposits,” said a notice issued by Hem K Chettri, managing director of the bank.