Fraud-hit Punjab & Maharashtra Co-operative Bank (PMC Bank), although in limbo and  under an administrator, will gobble up Rs27 crores a month to just to keep its 137 branches open across six states. This is nearly Rs one crore a day.

One the eve of Diwali, it is important for people to know that nothing substantial has happened in over a month towards resolution, but the cost of keeping the bank alive will be steadily eating up depositors funds. The longer the bank remains in this state, more money it loses, because the core banking business of lending money has been halted.

While aggrieved depositors are struggling to get their hard earned money back from the bank, the staff will earn salaries as usual, even if some of them have their own funds stuck in the bank, since it was their primary account.

Depositors are continuing to hold protests, trying to meet politicians and senior officials from the Reserve Bank of India (RBI). However, the RBI has refused to provide any answer so far, even while it has appointed Grant Thornton to conduct a forensic audit.

A depositor with over Rs 2 crore of his family money stuck in the bank raised an interesting question at Moneylife’s office today, which remains unanswered. According to media report, over 29% of the bank’s deposits were withdrawn in the three days before 23rd September, when RBI restricted withdrawals to Rs1000. (PMC Bank crisis: ‘5% of bank’s deposits were withdrawn in just two days). How did the bank have so much liquidity to be able to permit such large transfers? He asks. He also says that the  bank had been actively canvassing deposits for six months by claiming that it was into a massive expansion and also planning an Initial Public Offering (IPO). The IPO claim was clearly false, the suspicion is that the bank was either trying to raise deposits to cover the hole caused by its lending to Housing Development and Infrastructure Ltd (HDIL) or senior management and some insiders knew that the game was up and had created liquidity to withdrawn their own funds. Unless the RBI is made to provide information, depositors remain clueless.

Few days ago, there were talks about rich depositors of the bank bailing it out. According to Mumbai Mirror report, 200-odd ‘big depositors’ promised to maintain an untouched deposit of Rs5 crore each, if the PMC Bank was allowed to resume operations and start to function normally.As reported by Moneylife, this proposal to retain deposits will only yield Rs1,000 crore for PMC Bank. It is not clear how that would be enough to revive the Bank, when the capital is eroded, the dubious loan extended to the HDIL group is anywhere between  Rs4,500 crore to Rs6,500 crore and it is unclear what extent of the other loans are recoverable.

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