Mumbai Metropolitan Region

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HDIL

PMC Bank crisis: Customer express anger over RBI's restriction on the bank operations 02:54

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Untitled Carousel PMC Bank crisis: I should kill her, end my life too, says 72-year-old Dhapu Jain who has invested her life savings of Rs 1 lakh in PMC bank 72-year-old Dhapu Jain and her daughter-in-law were among hundreds of depositors who rushed to PMC bank branches yesterday, demanding explanations from staff.

Untitled Carousel ‘Allow PMC customers to withdraw Rs 1 lakh’ National bank depositors’ association says account holders should not be made to suffer.

Untitled Carousel Account-holders in City Co-op Bank hit hard too after PMC bank crisis Customers were hoping the ailing City Co-operative Bank will merge with the PMC Bank.

Maharashtra Urban Cooperative Bank Federation

A single account is responsible for the downfall of the Punjab & Maharashtra Cooperative (PMC) Bank, which was launched in a tiny room in Sion Koliwada back in 1984 and grew into a 137-branch network with more than half of its branches in the. The RBI yesterday put a slew of restrictions on the bank for six months citing several regulatory lapses, primarily massive under-reporting of the non-performing assets (NPAs). Sources told Mumbai Mirror that the biggest reason for RBI’s punitive action was a loan of Rs 2,500 crore to the now bankrupt real estate firm).This newspaper has learnt that the PMC Bank’s auditors did not classify the loan to HDIL as an NPA despite the HDIL defaulting on repayments, and the RBI finally put its foot down and termed the loan as a “complete loss”. “Thein such cases say that the bank must make a provision for the loss. The PMC Bank’s cash reserves stand at around Rs 1,000 crore, well short of the Rs 2,500 crore loan granted to the HDIL,” the source said.Rejecting demand for appellate authority, a senior RBI official said, " There is mathematical formula to classify any asset as a NPA, so there is no ambiguity there."When banks are asked to make provision for the NPAs, it basically means they must deduct the NPA amount from their profits. For instance, if a bank’s annual profit is Rs 500 crore and it is asked for make a provision for an NPA of Rs 400 crore, its profit then stands at Rs 100 crore.The HDIL spokesperson did not respond to queries from this newspaper and the RBI refused to divulge into the details. A source associated with the PMC Bank said that the RBI was convinced the loan to HDIL will have to be completely written off. “In case the RBI felt that the loan was not a complete loss, the PMC Bank would have to make provision for 10% of the total loan, for which it had the resources. The fact that the RBI has put severe restrictions on the bank is proof enough that it considers the entire loan to HDIL as NPA,” the source said. The major restrictions on the PMC Bank include capping withdrawals at Rs 1,000 per customer during the six-month period and banning the bank from extending new loans. The bank has also been barred from granting or renewing loans and advances, making any investment, incurring any liability including borrowing funds and acceptance of fresh deposits, disbursing or agreeing to disburse any payment whether in discharge of its liabilities and obligations without the RBI’s consent.The bank cannot enter into any arrangement for sale, transfer or otherwise dispose of any of its properties or assets, even as the RBI clarified that the restrictions should not be construed as cancellation of PMC’s banking licence.As per the bank’s annual report, its net profit declined marginally 1.2% to Rs 99.69 crore for the year to March 2019, while its net NPAs more than doubled to 2.19% from 1.05%.The development comes amidst the growing gloom among the public already battling a deepening slowdown which has resulted in job losses and rising prices of essential goods. The scenes outside the PMC Bank’s headquarters in Bhandup conveyed the chaos across the city as hundreds of depositors rushed in on hearing the news of the bank going ‘belly up’.Serpentine queues formed as early as 6 am yesterday outside the branches of the Punjab and Maharashtra Cooperative (PMC) Bank across the city after the news of the Reserve Bank of India (RBI) restrictions on the bank became public. Several people broke down in tears after being told that they can only withdraw up to Rs 1,000. Many of these had fixed deposit accounts worth lakhs of rupees in the bank, while many others had salary accounts which helped them meet their daily expenses. The PMC Bank has around Rs 11,000 crore of public deposits. Those who rushed into the branches speak for itself the profile of PMC Bank customers: autorickshaw and taxi drivers, small-time businessmen, pensioners and homemakers, and the elderly. As the number of panicked customers began to swell and tempers frayed, the bank had to call for police protection both for its headquarters as well as at other branches.Vidyadhar Anaskar, president of the, said that the RBI may have acted in haste. “In case of dispute between the bank’s auditors and the RBI, there should be an appellate authority to decide on the matter. Both the auditors and the RBI rely on the same set of documents to identify the NPAs. If the bank’s auditors are found to be right, who will compensate for the loss of reputation?” Anaskar asked.