The Madras High Court has stepped in to scrutinize a controversial decision regarding the financial management of religious endowments in Tamil Nadu. On Wednesday, 20th May 2026, a Vacation Bench of the High Court officially issued notices to the Reserve Bank of India (RBI) and the Union Ministry of Finance. The central government and the banking regulator have been asked to submit their formal responses to a Public Interest Litigation (PIL) that challenges a state policy.

This policy permits hundreds of crores of rupees belonging to Hindu temples to be moved and deposited into state-owned non-banking finance corporations (NBFCs).

The legal intervention was made by a two-judge Bench comprising Justice GR Swaminathan and Justice V Lakshminarayanan. After admitting the PIL, the judges issued clear instructions to the state’s Hindu Religious and Charitable Endowments (HR&CE) department, directing them to file a comprehensive counter-affidavit to the legal challenge by 27th May 2026.

Origin of the Controversial Policy

The policy in question stems from an order passed by the previous Dravida Munnetra Kazhagam (DMK) government. Under this directive, the state executive cleared the path for massive financial reserves—accumulated via temple collections and donations—to be moved out of conventional banking institutions. Instead, the funds were authorized for deposit into state-run financial entities. Specifically, the order targeted two major provincial corporations: the Tamil Nadu Power Finance and Infrastructure Development Corporation (TNPFC) and the Tamil Nadu Transport Development Finance Corporation (TNTDFC).

Critics and financial analysts quickly raised alarms over this move, pointing out that shifting hundreds of crores of religious trust wealth into these state-backed NBFCs could expose the funds to unprecedented financial hazards.

The Legal Challenge and Constitutional Questions

The formal legal battle against this directive was initiated by well-known temple activist TR Ramesh. His PIL directly challenges the government order dated 17/02/2026, which was originally processed and issued by the state's Department of Tourism, Culture, and Religious Endowments.

The contentious order effectively amended the long-standing Religious Institutions (Custody, Investments and Lending or Borrowing of Money) Rules of 1963. In his petition, Ramesh argued that this structural amendment is completely illegal, highly arbitrary, and fundamentally ultra vires—meaning it exceeds legal authority—when measured against the parent statutory provisions of the Hindu Religious and Charitable Endowments (HR&CE) Act of 1959. Furthermore, the petition claims the policy violates the fundamental religious freedoms guaranteed under Articles 25 and 26 of the Constitution of India.

Ramesh has requested the High Court to completely quash the government order. The central theme of his legal petition is that the policy forces temple wealth into highly volatile and unsafe state NBFCs that are already struggling under heavy financial strain and severe systemic losses.

Financial Instability and Low Credit Ratings

The petition presented to the Madras High Court goes into extensive detail about the precarious fiscal health of the corporations chosen to hold the temple funds. Ramesh informed the bench that both TNPFC and TNTDFC have been actively accumulating public deposits for years. However, rather than operating as independent, wealth-generating financial institutions, these entities have primarily functioned to sustain other struggling state utilities. Specifically, they have been channeling their public deposits to cover the heavy capital expenditures and daily working capital requirements of the Tamil Nadu Generation and Distribution Corporation (Tangedco) and various state-run transport corporations.

To highlight the underlying risk, the petitioner revealed that the TNPFC holds a weak 'BBB minus' credit rating. Crucially, this is the absolute lowest credit score a non-banking financial institution can legally maintain if it wishes to qualify to accept or renew deposits from the general public.

In his official court affidavit, Ramesh laid out the reality of the corporation's financial standing:

"TNPFC may have a perceived advantage of being 100% owned by the Government of Tamil Nadu, and that is perhaps the only reason that prevents its rating from going below BBB (-). Any rating below BBB(-) would at once incapacitate TNPFC or any other non-banking finance corporation from accepting or renewing deposits."

Compounding Deficits and Sectoral Pressures

The financial vulnerabilities do not stop at poor credit ratings. The petitioner alerted the court that the TNPFC functions almost entirely as a dedicated funding arm for the state's heavily indebted power sector, with a vast majority of its portfolio tied up directly in Tangedco. He stated that these state-run power sector entities are currently drowning under a collective accumulated loss that exceeds ₹1.62 lakh crore.

Similarly, the petition clarified that the financial health of the state's transport finance arm, the TNTDFC, is equally weak and unstable. Given these deep structural deficits, the petitioner strongly urged the High Court to protect religious endowments and block the state from utilizing sacred temple funds to bail out or prop up financially failing, state-run commercial institutions.

With the High Court demanding rapid accountability from both federal financial regulators and state authorities, the PIL is officially scheduled to come up for a crucial final hearing next week.