Monitoring Excess Deposit Withdrawals From Rural Lenders After PMC Bank Fraud, Says Nabard
The PMC Bank fraud has prepared Nabard to tighten its supervision.
The National Bank for Agriculture and Rural Development is regularly monitoring deposit withdrawals from regional rural banks and co-operative banks after the alleged fraud at PMC Bank, according to its Chairman Harsh Kumar Bhanwala.
As of now, there hasn’t been any significant withdrawal of deposits from regional rural banks and co-operative banks, Bhanwala told BloombergQuint in an interview. The scam at Punjab and Maharashtra Co-operative Bank has prepared Nabard to tighten its supervision, he said.
Nabard supervises cooperative banks and regional rural banks, and helps them in developing sound banking practices and onboarding them to the core banking solution platform.
Nabard is also keeping a watch on overexposure of these banks to one sector or entity, Bhanwala said, adding that it is monitoring if the banks are sticking to prescribed norms of the Reserve Bank of India on exposure to sectors, and at the same time checking whether the banks’ boards regularly review sectoral exposures. “If there is overexposure to a sector, it affects the health of the bank.”
This come after PMC Bank’s exposure to Housing Development and Infrastructure Ltd. was found to be 73 percent of its entire assets of Rs 8,880 crore, or four times the regulatory cap.
Bhanwala said the implementation of risk-based supervision—as made mandatory for public sector banks—for rural and co-operative banks, would help them in detecting risks early. A group of experts has been set up by the government to formulate a policy for early identification of risks and timely action, he said.
Watch the full interaction here: