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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