Panicked depositors outside PMC Bank after the curbs were first imposed in Sept 2019 (File image)
The Reserve Bank of India (RBI), in an order issued on March 26, announced that the restrictions on withdrawals and deposits in the scam-hit Punjab and Maharashtra Cooperative (PMC) Bank have been extended till June 30, 2021.
The curbs on the lender's activity were first placed in September 2019, after the central bank took cognisance of a major financial irregularity. The restrictions were consecutively extended, and were set to expire on March 31, 2021.
The RBI, however, has decided to maintain the status quo for at least three more months. In this period, it would continue to engage with prospective investors for the bank's reconstruction.
PMC Bank had received binding offers from certain investors for its reconstruction, in response to the expression of interest (EOI) floated by the bank on November 3 last year.
"RBI and PMC Bank are presently engaging with prospective investors in order to secure best possible terms for the depositors and other stakeholders while ensuring long term viability of the reconstructed entity," the central bank said in its latest order.
"Given the financial condition of the PMC Bank, the process is complex and is likely to take some more time," it added.
In the circumstances, it is considered necessary to extend the restrictions for a "further period from April 1, 2021 to June 30, 2021, subject to review", the RBI further said.
The RBI, after superseding the PMC Bank board in September 2019, found that out of the total loan book of Rs 8,383 crore - as of March 31, 2019 - about 70 percent had been issued to 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 that year. 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 HDIL group, however, has rejected the allegations of being involved in the bank fraud.
As part of the restrictions imposed by the RBI, the bank was not allowed to issue any fresh loans or undertake any other banking activities.
The depositors were also impacted as a cap of Rs 1,000 was imposed on withdrawals, which was later increased to Rs 50,000 and eventually Rs 1 lakh in June last year. However, a number of depositors who had kept higher amounts in the PMC Bank are awaiting the lifting of curbs by the RBI.