Punjab & Maharashtra Co-op (PMC) Bank Put under Restrictions by RBI; Depositors Can Withdraw Only Rs1,000
In a move that has caused panic among depositors, the Reserve Bank of India (RBI) on Tuesday imposed strict restrictions on the Mumbai-based Punjab & Maharashtra Cooperative Bank Ltd (PMC). It has been barred from carrying out a majority of its routine business transactions for six months, and depositors can withdraw only Rs1,000 from their accounts. 
 
This has sent shock waves in Mumbai’s banking and business circles since the Bank used to be considered very ethical and was known for its high service quality.
 
 
 
PMC Bank is one of the top 10 cooperative banks in India and offers 360 days of banking, including on Sundays and holidays. The regulator’s sudden action, with absolutely no warning, has led to heart-rending stories. K Mehta, a professor and person with disabilities, has tens of lakhs in deposits with the Bank’s branch which is the most accessible to her. R Singh, who just deposited Rs50 lakhs of his life savings in the Bank two days ago, broke down on hearing the news. His children’s accounts to cover their school fees are also at the Bank. A businessman fainted when Rs10 lakhs deposited with the bank for payments to suppliers got cleared, just before the Bank announced the RBI moratorium. 
 
 
The failure of the Bank, once again, points to RBI’s careless regulation of cooperative banks, followed by sudden, draconian action that only hurts depositors. Given PMC Bank’s high reputation and the trust that it enjoyed, this ought to lead to some serious thinking about the future of cooperative banks and the quality of their regulation. 
 
Update at 4.47pm 24/09/2019
 
Dear Customers, we assure you that your money is in safe hands. Please give your support & trust us at this crucial moment. The restriction is only for Temporary period.
 
-Managing Director, PMC BANK
 
According to the RBI directions, depositors will be allowed to withdraw only Rs1,000 of the total balance in every savings bank account or current account or any other deposit account from PMC Bank. "The PMC Bank will also not be able to grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except as notified in the RBI directions on 23 September 2019. The directions will remain in force for a period of six months from the close of business of the bank on 23 September 2019," says Yogesh Dayal, chief general manager of RBI, in a release.
 
 
Described as a multi-state cooperative banking entity, the PMC Bank has branches in Maharashtra, Delhi, Karnataka, Goa, Gujarat, Andhra Pradesh and Madhya Pradesh.
 
Founded in 1984 by S Gurcharan Singh Kochhar, in a small room in Mumbai, it has now grown to a network of 137 branches in six states and ranks among the top 10 cooperative banks in the country. 
 
As on 31 March 2019, PMC Bank had total deposits of Rs11,617.34 crore and advances of Rs8,383.33 crore. For FY18-19, the lender earned total revenues of Rs1,297.98 crore, higher than Rs1,170.49 crore it earned in the previous fiscal.
 
However, during FY18-19, its non-performing assets (NPA) jumped twice to 2.19% from 1.05% in the past year. 
 
The PMC Bank has been barred from granting, renewing and loans and advances, making any investments, incurring any liability, including borrowing of funds or accepting fresh deposits without the prior written approval from RBI.
 
 
In a statement on Tuesday, the PMC Bank's managing director (MD) Joy Thomas said the bank had been put under regulatory restrictions by the RBI owing to irregularities disclosed to the apex bank. "As the MD of the Bank, I take full responsibility and assure all the depositors that these irregularities will be rectified before the expiry of six months," Mr Thomas told to thousands of distressed customers of PMC Bank.
 
Thousands of anguished depositors rushed to the PMC Bank's head office in Bhandup, northeast Mumbai and its branches in different parts of the city to make withdrawals even as police were deployed around the branches to avert any untoward incidents.

You may also want to watch this video on chosing right bank by Sucheta Dalal, managing editor of Moneylife and Founder-Trustee of Moneylife Foundation...
 

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    COMMENTS

    Dr.Dhananjaya Bhupathi

    12 months ago

    https://economictimes.indiatimes.com/industry/banking/finance/banking/how-a-single-account-pulled-down-35-year-old-pmc-bank/articleshow/71290599.cms?utm_source=newsletter&utm_medium=email&utm_campaign=Dailynewsletter&utm_content=Story2&ncode=5c601ee2a3b09ad4739951af4083c4b3
    1. When RBI asserts its authority, why so much of Hallah Gullah?
    2. But, Rs.2500 crore can’t be released overnight. It takes months & years.
    3. What is the role of the Bank’s board, its CMD/CEO/ED/GMs? Concurrent /Statutory Auditor[s], RBI inspections?
    4. Such mishaps could be prevented right from the beginning.
    5. The Finance Ministry [as & when Duds of Adhocism/aphorism/prejudice are replaced by visionaries available aplenty]and or RBI is expected to issue broad guidelines; since depositors’ hard-earned money are involved.
    6. In these modern days, nobody tolerates ‘Big/Small Hair cut/Tonsure” by any Bank be it PSB/Private/co-op. bank.
    7. SATYAMAEVA JAYATHE!!!

    Kushal Kumar

    12 months ago

    According to news reports , RBI announced on 24 September , 2019 restrictions on the Punjab & Maharashtra Cooperative ( PMC ) Bank from carrying out a majority of its routine transactions for a period of six months. Obviously , the RBI move while being well intentioned , has put customers in a very tight position, disabling them from carrying on their life as usual for no fault on their part as they may not be able to withdraw more than rupees one thousand during the restriction period. In this context , it may be apt to refer readers to this Vedic astrology writer’s predictive alert through article - “ World trends in April to August 2019” - brought to public domain widely in March and subsequently on 5 April 2019. The predictive alert had said that during a period of four and a half months from mid-April to August 2019 , among other countries specified in the article , more care and appropriate strategy may be called for in India also in relation to the following :-
    “ 1. Economic and financial aspects may reflect major worrisome concerns.”
    A review of the predictive alerts carried out by this writer in May 2019 had suggested that such need for more care and appropriate strategy may reach out to mid-October , while the period from about 7 August to 9 October could be particular. And within that period , 25 September to 9 October in 2019 looked to be more particular. It seems that announcement of RBI on 24 September 2019 can be counted as meaningfulness of the predictive alert.

    VASANT KULKARNI

    12 months ago

    THE ACTION IS TAKEN IN HASTE. THE BANK IS STANDING ON A STRONG FINANCIAL BASE. THEY COULD HAVE BEEN ASKED FOR PROVIDING ADDITIONAL RESERVES FOR BAD LOANS.
    THIS HAS CREATED PANIC AMONG ALL TYPES OF DEPOSITORS. NO DOUBT THE MONEY APPEARS TO BE SAFE,SOME PREVENTIVE AND PUNITIVE ACTIONS COULD HAVE SAVED LOT OF DEPOSITORS FROM THIS HARDSHIP.

    LET SOME RELAXATION BE GIVEN TO DEPOSITORS.

    tanay

    1 year ago

    It seems like a ploy to stop opposition from accessing money before the local Maharashtra state elections....let's see once the election results are out, probably the restrictions will go away

    REPLY

    Homai Elavia

    In Reply to tanay 12 months ago

    Whatever the reason for this and other FIRs, there is a simple solution. Give all the MPs and MLAs just Rs.1,000 (or now Rs.10,000) as their salary for this month and ask them to live on this for the next 6 months. Whoever suggested the cap of Rs.1,000 (or now Rs.10,000) is either stupid or has sufficient black money to take care of his needs. Set the income tax authorities to investigate such persons.

    sanjay modak

    1 year ago

    Again a shocker from RBI to naïve depositors. Why is RBI forced to take such drastic action before taking corrective action. Was there a single irregularity that occurred to lead RBI to place moratorium or there were series of such irregularities that were previously not detected by the Statutory Auditors and RBI Inspections?

    For Nationalised Banks, the Govt . pumps in thousands of crores of rupees. Otherwise, many nationalised Banks would have been into Bankruptcy. Why not RBI or Govt. protect the depositors of Co-Operative Banks from such drastic step to place Banks suddenly on moratorium?

    Going forward, if a big bank like PMC is placed on moratorium, then such action could accentuate run on co-operative banks by the depositors. Even it could be a rock solid Saraswat Co-operative Bank which would suffer deposit erosion due to such drastic action by RBI.

    TIHARwale

    1 year ago

    Another bank which should have been shut down is IDBI Bank. LIC invested Rs 21,624 crore in the bank to increase its stake to 51 per cent from 8 per cent in September-December 2018. The value of its equity holdings is now Rs 10,967 crore, a fall of 47 per cent in less than a year, after the bank, now classified as a private sector lender, raked up losses amounting to Rs 8,718 crore in just two quarters. Hail the leader who informed the Nation Pakoda making is an important project of Make in India

    TIHARwale

    1 year ago

    it will not be too far even PSBs would meet similar support if GOI is not having majority stake. Banking regulation is a big joke well known to every one in Banking circles

    No Bank Strike on 26-27th September
    Following discussions with the government and receiving assurance to set up a committee for looking into the issues arising out of public sector bank (PSB) consolidation, the 26th and 27 September 2019 strike called by bank officer's union has been deferred. 
     
    "The secretary finance was positive in formation of a committee consisting of all concerned to address the issues arising out of the proposed merger of 10 banks, including preserving the identity of all the banks," bank unions said in a statement.
     
    The strike call was given by four officers' unions of the banking industry -- All India Bank Officers' Confederation (AIBOC), All India Bank Officers' Association (AIBOA), Indian National Bank Officers Congress (INBOC) and National Bank Officers' Organisation (NOBO).
     
    The strike was deferred by the four officers' unions of the banking industry after their representatives met with Finance Secretary Rajiv Kumar, who gave positive feedback on the formation of a Committee which will look into the issues arising out of the merger.
     
    The unions says, "An appeal was made to us to revisit our strike call in view of the discussions... In view of the consideration of the positive and workable solution by the Secretary, Finance, the 48-hour strike from midnight of 25th September, 2019 to 27 September, 2019 stands deferred."
     
    The development assumes significance as the proposed strike call by the state-run lenders' unions against the mega PSB merger would have commenced on 26th September, Thursday, and end on 27th September, Friday.
     
    This strike, along with the planned monthly non-working day of fourth Saturday on 28th September and Sunday on 29th September, would have effectively shut PSB operations for four consecutive days, thus, hampering cash withdrawals at branches and automatic teller machines (ATMs). In addition, on Monday, 30th September, banks have half-yearly closing.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    Dr.Dhananjaya Bhupathi

    12 months ago

    https://www.govtempdiary.com/2019/09/bank-unions-defer-2-day-strike-aiboc-aiboa-inboc-inobo/58908?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+govtempdiary%2FCFjz+%28GOVTEMPDIARY%29

    1. HATS OFF TO THE DFS, UFM, FINANCE SECRETARY SHRI RAJIV KUMAR & THE UFBU LEADERSHIP!!!
    2. When the visionary in DFS agreed to sort out the issues amicably, the strike has been averted. “According to Justice Hegde, good governance can be provided by public servants only if they realize that “they are not masters of the people, but they are only servants of the people and that they owe a duty to the people”. For this, he says, they will have to follow certain principles of 'Raj Dharma'. The ingredients of 'Raj Dharma' is enumerated in a report prepared by Lord Nolan from the UK, which is known as 'standards in public life", and include selflessness, integrity, objectivity, accountability, openness, honesty, and leadership”.
    3. But, the staff at PMO & UFM is expected to have a changed mindset to catch the vision of the PM. Moreover, the businessman’s greedy- mindset of BJP/RSS cadres + decision-makers in UFM is such that the employees need not be paid much; notwithstanding their vast contribution + honesty to the core & hard-working nature. A sea-change in tune with fast Indian social change must be the order of the day.
    4. Shri Narendra Modi envisions ensuring a bright future to the teeming millions of the well-qualified Indian youth.

    5. Total PSB+ SBI Deposits come to [127+37} Rs.164 trillion [1 trillion=1 lac crores]; whereas Modiji wants to mobilize Rs.350 trillion [US $.5 x 70]. It is approximately double + to the existing deposits. The credit for such enormous PSB-deposit growth goes to the competent managements & hard-working & honest to the core- micro & macro level workforce [starting from Attender–Scale VII Executives- GMs].
    6. When the existing honest to the core + hard-working staff has to put up double the output; they are, already, put to unlimited stress & strain. The majority are said to be inclined to go on VRS. Big-ticket NPAs are the creation of PSB Boards, involving CMDs, CEOs, and EDs, etc.
    7. POST-PSB MERGER SCENARIO & REMEDIES:
    a. Enmasse Closure of Branches-followed by en masse VRS by existing staff.
    b. ONE SC SENIOR LAWYER USED TO SAY ‘FOR EVERY COMPLICATED ISSUE, AN INTELLIGENT PERSON HAS A SIMPLE REMEDY”. IT IS NONE ELSE OTHER THAN SHRI NARENDRA MODI & SMT. NIRMALA SITHARAMAN TO RESOLVE THE ISSUE!!!
    8. When GOI is half-way on mergers, UNREST is avoidable just with ordnance from the President’s office. Let PSB employees’ wages & pensions be brought under CPC purview.
    9. When RBI’s reserves were taken out Rs.2 trillion to import Rafaale fighter planes, RBI EMPLOYES’ WERE SANCTIONED PENSION UPDATION. Bank employees’ Pension Fund Rs.1.20 trillion can be transferred to Central Exchequer. To meet the retirees’ pension up-dating, FP enhancement & other needs, etc. PSBs continue to contribute to the Pension Fund.
    10. https://www.youtube.com/watch?v=T7fOf8rUrdw.
    11. SATYAMAEVA JAYATHE!!!

    RBI revises norms for concurrent audit of banks
    The Reserve Bank of India has revised the norms of concurrent audit of banks whereby the apex bank has capped the term for concurrent auditors at three years.
     
    Concurrent audit aims at shortening the interval between a transaction and its independent examination. 
     
    "The age limit for retired staff engaged as concurrent auditors may be capped at 70 years. However, no concurrent auditor shall be allowed to continue with a branch or business unit for a period of more than three years," RBI said in a notification on Thursday.
     
    It also said that banks' internal audit department should develop a reporting system for concurrent auditors with the approval of Audit Committee of the Board of Directors (ACB) or Local Management Committee (LMC).
     
    The findings of the concurrent auditors may be received in a structured format prescribed by the bank. Minor irregularities pointed out by the concurrent auditors shall be rectified on the spot. The major deficiencies or aberrations noticed during audit should be immediately brought to the notice of head office or controlling office of the concerned branch or business unit of the bank, it said.
     
    "If external firms are appointed and any serious acts of omission or commission are noticed in their working, their appointments may be cancelled after giving them reasonable opportunity to be heard and the fact shall be reported to ACB/ LMC of the bank, RBI and ICAI," said the notification.
     
    The apex bank further said that the bank should frame a policy for fixing accountability in cases of serious acts of omission or commission noticed in the working of a bank's own staff or retired staff, working as concurrent auditors.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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