Even after eight months since the Reserve Bank of India (RBI) superseded the bank’s board and appointed an administrator, the revival plan is yet to progress meaningfully
There are no takers yet for Mumbai-based Punjab and Maharashtra Co-operative Bank (PMC), which failed last year following a large-scale management fraud.
Even eight months after the Reserve Bank of India (RBI) superseded the bank’s board and appointed an administrator, the search for a possible merger candidate is yet to progress meaningfully, said two persons familiar with the development.
“PMC case appears to be in cold storage for now,” said one of the two persons quoted above.
The RBI has been looking at options to resolve the crisis and find a potential suitor for the bank. It has had a few rounds of meetings on the PMC bank issue with stakeholders. But lack of interest from other banks for takeover is creating a hurdle for an early resolution.
The RBI superseded PMC Bank board in September 2019. Of its total loan book of Rs 8,383 crore, as on March 31, 2019, about 70 percent had been taken by real estate firm HDIL. The bank had Rs 11,600 crore in deposits. The police later arrested Joy Thomas, former managing director of the PMC bank in October. The investigators have made a few more arrests since then.
During investigations, it was found that the bank had been allegedly running fraudulent transactions for several years to facilitate lending to HDIL through fictitious accounts and violating single-party lending rules. The RBI imposed restrictions on deposit withdrawals and superseded its board after the fraud was detected.
Deposit withdrawal restrictions were imposed on the bank (initially Rs 1,000 per account which was later increased to Rs 50,000). About 78 percent of the depositors have since been allowed to withdraw their deposits within the withdrawal limit of Rs 50,000. But that still leaves out many depositors who have bigger amounts parked in the bank.
Even though Rs 50,000 is the deposit withdrawal limit, some depositors of the bank told Moneycontrol that bank is insisting on written requests from some customers for withdrawals.
Interestingly, the aggrieved depositors of PMC bank even include two RBI employee co-operative societies, which together have around Rs 190 crore in the bank. In fact, the RBI employee associations had even suggested a few names to the central bank’s top brass to consider for a merger. This included a few Mumbai-based public sector banks.
PMC is not the only cooperative bank that has collapsed. There have been several such instances in the cooperative banking industry.
On May 2, the RBI cancelled the licence of Mumbai-based CKP Co-operative Bank. RBI said the financial position of the bank is highly adverse and unsustainable. The bank, as per RBI's observation, also did not have any concrete revival plan or proposal for a merger with another bank. The bank had nearly 97 percent of Gross Non-Performing Assets (GNPAs), a lot of which were loans given to small and mid-sized real estate developers.
Besides PMC, the RBI imposed restrictions on Bengaluru-based Guru Raghavendra Sahakara (Co-operative) Bank Niyamitha on January 10 from renewing loans and deposits. The bank was also asked to not allow withdrawals beyond Rs 35,000 per account. Similar restrictions were imposed on Kolkata’s Kolikata Mahila Cooperative Bank with deposit withdrawal restrictions of Rs 1,000 per account. On April 17, the RBI cancelled the license of Mapusa Urban Co-operative Bank for financial failure.However, in the case of Yes Bank, a new age private bank which failed early this year, the RBI could act swiftly to implement a successful bailout scheme with the help of a bank consortium led by State Bank of India.