RBI Imposes Restrictions On PMC Bank, Withdrawals Capped At Rs 1,000 For Six Months
People outside a branch of Punjab & Maharashtra Cooperative Bank. (Photo: BloombergQuint)

RBI Imposes Restrictions On PMC Bank, Withdrawals Capped At Rs 1,000 For Six Months

The Reserve Bank of India has capped withdrawals by customers of Punjab & Maharashtra Cooperative Bank for six months and placed the lender under certain restrictions, invoking powers under India’s Banking Regulation Act, 1949.

The customers of PMC Bank will not be allowed to withdraw more than Rs 1,000 from their savings, current or any other deposit account, during the period of restriction, according to RBI’s notification on its website.

PMC Bank is an urban cooperative bank regulated by the central bank. As such, deposits up to Rs 1 lakh per person held in the bank are insured by the Deposit Insurance and Credit Guarantee Corporation.

The banking regulator also imposed restrictions on further lending by PMC Bank.

“Punjab & Maharashtra Cooperative Bank, Mumbai, Maharashtra, without prior approval in writing from the RBI, will 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 Sept. 23, 2019,” the RBI’s notification said.

The restrictions will remain in place for six months, starting Sept. 23, RBI said without offering more details. The central bank, however, clarified in its directions that the restrictions don’t mean that the bank’s licence had been withdrawn and that it could consider easing these restrictions depending on how PMC Bank’s situation improves.

Joy Thomas, managing director at the lender, remained unavailable for comments and BloombergQuint couldn’t reach the bank’s headquarters as the phone lines were disconnected.

But in a message received by one of the bank’s shareholders, Thomas said, “I regret to inform you that your PMC Bank has been put under regulatory restriction under Section 35A of B.R. Act by RBI for a period of 6 months due to irregularities disclosed to RBI.”

“As the M.D. of the Bank, I take the responsibility and assure all the depositors that these irregularities will be rectified before the expiry of 6 months. All efforts are made to remove the restrictions by rectifying the irregularities,” he said.

“I know it is a difficult time for all of you and any apology may not restore the pain you are undergoing. Please co-operate with us. We assure that we will definitely overcome this situation and stand strong.”

PMC Bank had reported loans and advances worth Rs 8,383 crore as of March 2019. The bank’s deposit base stood at Rs 11,617 crore, while its capital adequacy ratio was 12.62 percent during the period. Its gross bad loans contributed to 3.76 percent of the loan book. According to PMC Bank’s annual report, it had 137 branches as of March and 1,814 employees.

The restrictions were placed after the RBI invoked Section 35A and Section 56 of the Banking Regulation Act. These sections allow the banking regulator to impose conditions on banks, including cooperative lenders, to protect the interest of the depositors.

The RBI has been regularly placing restrictions on urban cooperative banks, depending on the severity of the problems faced by these banks. In September, the central bank placed or extended restrictions for four such banks, while withdrew restrictions placed on Indian Mercantile Cooperative Bank.

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