Calcutta, July 16: Calcutta High Court today set aside a notification issued by the Reserve Bank of India (RBI) last May ordering the closure of Birbhum Central Co-operative Bank and allowed the facility to start operations with immediate effect.

The RBI had alleged in the notification, dated May 9, 2014, that the bank had failed to recover loans worth Rs 100 crore and also did not deposit with it the mandatory 4 per cent of the total transactions in the 2011-2012 and 2012-2013 financial years.

After the notification, the 18 branches of the co-operative bank in Birbhum along with the 319 primary agricultural co-operative societies (PACS) under it stopped functioning, affecting more than five lakh customers of the bank and 31,900 farmers who had kept money in the PACS.

"Since the Centre and the state government have already signed a memorandum of understanding (MoU) in the presence of the National Bank for Agricultural and Rural Development (Nabard) and disbursed nearly Rs 74 crore for the revival of the (co-operative) bank, this court is setting aside the RBI notification. There is no bar on the bank authorities to start functioning with immediate effect," Justice Arijit Banerjee of the high court said today.

"Experts from Nabard and the RBI will look after the affairs of the bank. The bank will have to be revived by March 31, 2017," the order added.

Today's order followed petitions jointly moved by the co-operative bank's employees, and the 319 PACS, challenging the RBI notification in the high court.

Moving the petition before the court in June last year, advocate Srijan Nayek had said Birbhum Central Co-operative Bank was 60 years old and claimed that in 2013-2014, the bank had made substantial transactions, which the RBI had not taken into consideration while issuing the notice.

"Altogether, 23 such co-operative banks across the country were closed down by the RBI. Most of the closed banks were in Varanasi. The central government is trying to chalk out a scheme for the revival of the banks and is taking the opinions of the RBI and Nabard. Respective state governments have been involved in the plan," Nayek had informed the court.

"Since the jurisdiction of the judges have changed from time to time, at least 10 judges have heard the case since June last year. In November, when the case was being heard by Justice Aniruddha Bose, we had informed the court that both the central and the state governments had already formulated a revival plan. The Centre had provided Rs 31 crore and the state Rs 43 crore for the revival of the bank," Nayek said after today's verdict.

"Justice Bose had asked the state to turn the amount into a special fund. But the bank could not be opened as the RBI was opposing such a move," he added.

Arijit Chowdhury, the lawyer representing the RBI, said in court: "The case should not be disposed of. My client may approach the court if the bank does not function properly."