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PMC Bank crisis one year on: No resolution in sight yet

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.

September 17, 2020 / 01:51 PM IST

A year after the Reserve Bank of India (RBI) superseded the board of Mumbai-based Punjab and Maharashtra Co-operative (PMC) Bank after discovering major financial irregularities and fraud, the RBI-appointed administrator is yet to succeed in finding a resolution plan for the bank.

According to a Reuters report, the administrator has approached major banks with a merger request, the bank’s administrator said in a Sept. 10 filing at the Delhi High Court, without identifying the banks or giving other details.

This is even as the efforts to recover money from HDIL is still halfway. On September 16, Mumbai Mirror reported that PMC Bank didn’t find any takers during the auction of two airplanes and a yacht owned by HDIL Group promoters. These assets together valued at Rs 350 crore, the report said.

HDIL has denied any wrongdoing in this case.

In May this year, Moneycontrol first reported that there are no takers yet for the Mumbai-based bank. The regulator too has been engaging with various stakeholders to find a taker for the bank but with no success yet. According to persons familiar with the development, the RBI 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The RBI superseded PMC Bank board in September 2019.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 The RBI imposed restrictions on deposit withdrawals and superseded its board after the fraud was detected.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. Even though this limit was further enhanced to Rs 1 lakh in June this year, many depositors who have bigger amounts parked in the bank are still not able to get their money back.

While enhancing the withdrawal limit to Rs 1 lakh, the RBI had said that more than 84 percent of the depositors of the bank will be able to withdraw their entire account balance.

However, two depositors of the PMC bank told Moneycontrol that the 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. The 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.

Not all depositors are equal?

In the case of Yes Bank, a new-age private bank which nearly 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.

Depositors of PMC Bank allege that the sense of urgency to find a resolution framework for Yes Bank on the part of the regulator and the government is absent in the PMC case. Several depositors of the PMC Bank are still unable to draw their money parked in the bank.

“The Yes Bank resolution happened quickly. Why isn’t the same not done in PMC Bank case? I’m a mechanic by profession and the amount stuck in the bank was a good part of my savings. When will I get my money back?” asked a depositor based in Navi Mumbai, who spoke on condition of anonymity.
Dinesh Unnikrishnan
first published: Sep 16, 2020 05:30 pm
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