‘RBI Would Not Allow A Cooperative Bank To Collapse’ – Governor Shaktikanta Das On PMC Bank Crisis
Indian banking sector remains sound and stable, no reason for unnecessary panic, says the RBI governor.
“The Reserve Bank of India would not allow a cooperative bank to collapse,” said Governor Shaktikanta Das in a press briefing held after the Monetary Policy Committee announced a 25-basis-point cut in the benchmark repo rate.
Das was responding to questions on the crisis at Mumbai-based Punjab and Maharashtra Cooperative Bank Ltd. where recent revelations show exposure to one real estate borrower, Housing Development & Infrastructure Ltd., amounts to over 70 percent of the bank’s loan book. The recovery of these loans is doubtful. In a confession letter to the RBI, PMC Bank’s former Managing Director Joy Thomas detailed a history of dubious transactions with HDIL and its promoters — the Wadhawan family.
In the past two weeks, the RBI superseded the bank’s board, invoking powers under the Banking Regulations Act. It appointed an administrator to run the bank for now as well as a three-member committee to assist the administrator. It has also imposed a withdrawal limit of Rs 1,000 for a six-month period and has since relaxed it to Rs 25,000.
“As soon as PMC Bank issue came to the RBI’s notice, action was taken swiftly, promptly,” said Das today. He also cautioned that one incident should not be used to generalise about the health of the cooperative banking sector.
Indian banking sector remains sound and stable, no reason for unnecessary panic.Shaktikanta Das, Governor, RBI
When questioned further by the media, Das said the central bank was looking into all aspects of the PMC Bank case and that there are ongoing discussions with the government on regulatory provisions for cooperative banks. “Based on the PMC Bank experience, the RBI will give a fresh look at existing regulatory experience,” Das said.
On Thursday, Oct. 3, the state’s Economic Offences Wing arrested HDIL’s directors Rakesh and Sarang Wadhawan. PMC Bank’s former chairman Waryam Singh, suspended Managing Director Joy Thomas and other senior officials, along with a director of HDIL, are also being investigated by the Enforcement Directorate, reported PTI.
According to initial investigation the bank’s losses since 2008 were Rs 4,355.46 crore, the report said.