Punjab & Maharashtra Co-op (PMC) Bank Put under Restrictions by RBI; Depositors Can Withdraw Only Rs1,000
Moneylife Digital Team 24 September 2019
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.

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Comments
Dr.Dhananjaya Bhupathi
2 years 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
2 years 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
2 years 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
2 years 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
Homai Elavia
Replied to tanay comment 2 years 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
2 years 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
2 years 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
2 years 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
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