PMC Bank receives four proposals for investment; restrictions extended till March 31, 2021

Crisis-ridden Punjab and Maharashtra Cooperative Bank (PMC) has received four Expression of Interests (EoIs) for investment/participation in its reconstruction.

Last date for submission of EoIs was December 15, 2020.

"The bank has informed the Reserve Bank of India (RBI) that in response to EoI, four proposals have been received. These proposals will be examined by the bank with regard to their viability and feasibility taking into account the best interest of the depositors," the bank said in a notification.

The directions/restrictions placed on the bank have been extended further till March 31, 2021, as it needs more time to study the proposals.

The bank had invited EoIs for investment and equity participation in the bank for its reconstruction on November 3.

The RBI superseded PMC Bank board in September 2019. About 70 percent of its total loan book of Rs 8,383 crore as on March 31, 2019, had been taken by real estate firm HDIL. The bank had Rs 11,600 crore in deposits. The police arrested Joy Thomas, former Managing Director of the PMC Bank, in October. The investigators have since made a few more arrests.

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 The RBI imposed restrictions on deposit withdrawals and superseded its board after the fraud was detected.

Subsequent to the commencement of the normal day-to-day operations, it will be open for the investors to convert the bank into a Small Finance Bank by making an application to the RBI, the bank had said inviting interest.

This, however, will be subject to compliance of the RBI guidelines on Voluntary Transition of Primary (Urban) Co-operative Banks (UCBs) into Small Finance Banks (SFBs) dated September 27, 2018, PMC Bank said. Eligible investors could be Financial Institutions, including banks and NBFCs and individuals or Group of Individuals/ companies, societies, trusts or any other such entities having adequate net worth, the bank said.

According to the details of the proposal, the investor should bring in the capital required for enabling the bank to achieve the minimum required capital to risk weighted assets ratio (CRAR) of 9 per cent.

The investors can later explore the option of restructuring a part of deposit liabilities into capital/capital instruments, the bank said, adding, it may also approach DICGC for its support for payment up to Rs 5 lakh to depositors.

After due evaluation, the viable proposal(s) will be forwarded to the RBI for its consideration for preparing a draft scheme of reconstruction and other consequential action under Section 45 of Banking Regulation Act, 1945, the proposal had said.

The shortlisted investors needs to conduct due diligence on PMC Bank and subsequently submit their binding offers for further consideration by PMC Bank on or before 15 December, 2020, the bank said.

According to the bank, it had total deposits of Rs 10,727.12 crore, total advances of Rs. 4,472.78 crore and gross NPA of Rs 3,518.89 crore as on March 31, 2020. The share capital of the bank is Rs 292.94 crore. The bank registered a net loss of Rs 6,835 crore during 2019-20 and has a negative net worth of Rs 5,850.61 crore.