A High Court verdict barring banks from imposing limits on the amount of money customers can withdraw from their accounts is a “risky move” that could send “send shocks throughout the banking system,” former Economic Minister Mahmood Raazee has said.
In a ruling issued on Sunday, a three-judge panel ruled that banks are obliged to hand over the amount of money deposited by customers in its entirety.
The Bank of Maldives Ltd (BML) had appealed a judgment by the Naifaru magistrate court in favour of an NGO called Naifairu Juvenile, which sued the national bank after it refused to allow full withdrawal of US dollars deposited at its account.
BML had insisted that the full amount could only be withdrawn in local currency despite the NGO having deposited US dollars.
The High Court on Sunday unanimously upheld the lower court’s decision. Having used the money for loans or other credit facilities does not justify placing limitations on withdrawal amounts, the court said.
Commercial banks operating in the Maldives have placed limits on the amount of foreign currency sold to individuals in the face of a persisting dollar shortage.
But the High Court declared that the only circumstances under which the bank can withhold funds for a cheque is if the account does not have a sufficient balance or if the cheque is incomplete or outdated.
The High Court ruling could reduce banks from financial enterprises to safety deposits, Raazee contended, adding that the judiciary must not assume the role of policy maker in the financial services industry.
Banks in the Maldives follow international standards and procedures, he said, which allow limitations on cash withdrawals.
“What if everyone suddenly said we want to withdraw all the money we deposited, what then happens to the bank?” he asked.
The High Court meanwhile said that the rights of customers would be infringed if banks could convert deposits from one currency to another at their discretion, which banks are not authorised to do under the agreement signed with its customers.
Converting money deposited in a particular currency to another against the will of a customer “infringes the account holder/customer’s rights, as the original intention of opening the account was to carry out transactions in a particular currency,” the ruling stated.
Razee agreed that withdrawals should be allowed in the form of the currency in which the original deposit was made.