PMC Bank Crisis: How you can withdraw more for special needs

 There’s a bit of a relief for customers of the beleaguered Punjab and Maharashtra (PMC) Bank. Apart from the maximum amount of Rs 40,000 that depositors can withdraw (up from earlier Rs 25,000, according to RBI’s prescribed limits), the Central Bank has allowed withdrawals of up to Rs 1 lakh in certain cases.

Conditions apply

Withdrawal is permitted to the extent of Rs 1 lakh for medical emergencies and Rs 50,000 for marriage in the family, for senior citizens, disabled persons and for education purposes. The limit of Rs 1 lakh for medical emergencies is not over and above the Rs 40,000 normal limit prescribed by the Bank.

The small relief comes in the wake of tragic casualties and untimely deaths of some depositors being reported due to the stress that the restrictions on PMC bank have caused to depositors. On October 19, the Indian Express newspaper reported the death of Muralidhar Daara, 83, a PMC Bank account holder, due to a heart attack. The newspaper report indicated that this was the fourth death reported of a PMC bank account holder since the restrictions were imposed in September 2019. The deceased person’s family said that they couldn’t arrange for funds to pay for a critical heart surgery. Muralidhar Daara had Rs 80 lakh in deposits with PMC bank, but the family members couldn’t withdraw the amount for his treatment due to the limit on withdrawal being fixed at Rs 40,000.

The RBI has advised PMC bank officials to adopt a procedure for allowing withdrawal above the stipulated amount when there are cases of hardship.

Withdrawing amounts

 In case there is a medical emergency for self, spouse, children or parents, you need to submit the estimated expenses along with the concerned doctor’s certificate, medical reports and bills (for ongoing treatment) while applying for extra withdrawal.

Harshil Morjaria, a Mumbai-based certified financial planner of ValueCurve Financial Solutions says, “For medical emergencies, the bank should allow withdrawal as certain percentage of estimated medical expenses submitted that is authorized by the hospital. This Rs 1 lakh is insufficient for most medical treatments, with rising costs.”

Senior citizens can withdraw up to Rs 50,000 (higher than the Rs 40,000 for other depositors) for their sustenance. But such depositors must submit their age proof.  Widows too are permitted to withdraw up to Rs 50,000 and so are disabled depositors, after submitting their disability certificates. All such depositors must also submit their estimated monthly expenses.

Sapna Tiwari, Co-Founder and COO, Rupeewiz Investment Advisors says, “There is not much relief for senior citizens and disabled persons from this move since there is only a difference of Rs 10,000 between the maximum withdrawal limit and the amount they are now able to withdraw after submitting documents on grounds of hardship. They should also be allowed to withdraw Rs 1 lakh from deposits with the bank.”

The hardship payment of Rs 50,000 is also available for those who wish to pay school or college fees for their own selves or for their children. Make sure that you submit an estimated fee receipt, which has to be certified by the school or institute, to your bank branch.

In case there is a marriage in the family – of yourself, children, brothers or sisters – you need to submit the marriage invitation card, hall booking receipt, receipt for ornaments, etc. to your bank branch.

Should the deposit insurance cover be hiked?

The deposit insurance cover was last hiked in May 1993 to Rs 1 lakh from Rs 30,000 fixed in July 1980. A State Bank of India (SBI) research report dated October 7, 2019 says that the recent PMC Bank crisis has raised the question of deposit insurance in India.

Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India, says in a report that the deposit insurance coverage is very low. He says, when the insurance amount is seen as a percentage of per capita income vis-à-vis other countries, it is 0.7 per cent for India, but is 3.7 per cent for Australia, 4.4 per cent for the US and 7.4 per cent for Brazil. Given this backdrop, he says that there is a need to revisit the insurance coverage of bank deposits.