South Indian Co-operative Bank's depositors have threatened to move court against the Reserve Bank of India for not honouring pay orders issued by the bank on August 9.

They have given an ultimatum to the central bank saying that if does not address their grievances within seven days, the depositors will take legal action. The genesis of the controversy lies in two circulars issued by the RBI, said K A Viswanathan, a coordinator for depositors of the bank.

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A circular issued by the RBI executive director A V Sardesai to the co-operative bank on August 9 stated, among the other things, that excluded from the moratorium are renewal of existing deposits on maturity and pay orders issued by the bank which remain unpaid on the date (that is August 9) on which the moratorium comes into force.

However, the president of the RBI public accounts department issued a circular to the clearing-house on the morning of August 10 stating that the SICB ceases to be a sub-member of the Brihan Mumbai Bankers clearing house with effect from the close of business on August 9.

As a result of this, when the depositors presented the pay orders issued on August 9 for clearance, they were refused payment as the bank ceased to be the member of the clearing house, said a group of depositors.

"One department of the RBI does not know what the other department is doing. If the bank had informed us of this on August 9, we would have taken cash or they should have kept the clearing house open for clearing the pay orders as per their circular," said Viswanathan.