Depositors panic as withdrawals capped at Rs 1,000 per account.
Mumbai: The Reserve Bank of India (RBI) on Tuesday barred Mumbai-based Punjab and Maharashtra Cooperative Bank Limited (PMC Bank) from granting new loans and accepting deposits besides capping withdrawals to Rs 1,000 per account.
The restrictions will remain in force for six months from the close of business of the bank on September 23, 2019, the central bank said.
The RBI putting withdrawal limits for account-holders led to protest by depositors outside the bank's main branch in Mumbai's Bhandup area and various other branches. Videos circulating on social media showed angry customer reactions at PMC Bank’s branches. Some customers used twitter to voice their opinion while some urged Finance Minister Nirmala Sitharaman to take notice of the issue.
"The depositors will be allowed to withdraw a sum not exceeding Rs 1,000 of the total balance in every savings bank account or current account or any other deposit account by whatever name called, subject to conditions stipulated in the RBI directions," the RBI said in a press release.
"Without the prior approval in writing from the Reserve Bank, the bank will also not be able to grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except as notified in the RBI directions dated Septem-ber 23, 2019," the RBI said.
In a statement on Tuesday that was widely circulated, the PMC Bank's Managing Director Joy Thomas said the bank had been put under regulatory restrictions by the RBI owing to irregularities disclosed to the RBI. “As the MD of the bank, I take the responsibility and assure all the depositors that these irregularities will be rectified before the expiry of six months. All efforts are made to remove the restrictions by rectifying the irregularities," Thomas said. He said it was a difficult time for all, but urged the people to cooperate.
According to reports, under-reporting of bad loans could be one of the reasons behind RBI placing restrictions on PMC Bank. “The RBI does an inspection once a year and we have been told that the bad loans were much higher than what was reported. Otherwise it’s a big bank and is doing well,” said a banker.
The RBI, however, said the issue of the directions to PMC Bank should not be construed as cancellation of banking licence by the central bank. PMC Bank can continue to undertake banking business with restrictions till further notice/instructions from RBI. The Reserve Bank may consider modifications of these directions depending upon circumstances it said.
PMC Bank is a multi-state scheduled urban co-operative bank with its area of operation in the States of Maharashtra, Delhi, Karnataka, Goa, Gujarat, Andhra Pradesh and Madhya Pradesh. Founded in 1984, the Bank has 137 branches in six states and ranks among the top 10 cooperative banks in the country.
PMC advances stood at Rs 8,383 crore as of March 2019, an increase of 13 per cent over the previous year while deposits rose 17 per cent to Rs 11617.34 crore.
