Outside a PMC Bank branch in Kopar Khairane in Navi Mumbai. (Express photo by Narendra Vaskar) Outside a PMC Bank branch in Kopar Khairane in Navi Mumbai. (Express photo by Narendra Vaskar)

The RBI on Tuesday slapped restrictions on Punjab & Maharashtra Co-operative Bank Limited (PMC Bank), a leading cooperative bank headquartered in Mumbai, for various irregularities. The move created panic among thousands of depositors.

In its directions to the bank, which has a deposit base of Rs 11,617 crore, the central bank said depositors will be allowed to withdraw only Rs 1,000 of the total balance in every savings bank account or current account or any other deposit account. Hundreds of customers rushed to PMC Bank branches across Maharashtra as soon as the announcement came. There was chaos around the branches as customers were unable to withdraw more than Rs 1,000.

The RBI also said the bank 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 without prior approval in writing from the Reserve Bank of India.

Explained: Why RBI has put restrictions on a cooperative bank, what happens now

Though the RBI did not disclose the specific lapses on the part of the bank, banking sources cited under-reporting of non-performing assets (NPAs) as the main reason for the regulatory action. While the bank reported 3.76 per cent of advances as gross NPAs in March 2019, the actual NPA level is likely to be much higher, sources said.

Explained Curbs to hit customers across 7 states PMC Bank, an urban cooperative bank with deposit base of Rs 11,617 crore and operations across seven states, has been put under the scanner by the RBI after “irregularities” were disclosed to the banking regulator. Given that it ranks among the top 10 cooperative banks in the country and the RBI restrictions will remain in force for six months, unrest among customers is likely to continue.

The bank’s Managing Director Joy Thomas took “responsibility” for the “irregularities”. “I, Joy Thomas, MD, regret to inform you that your PMC Bank has been put under regulatory restriction… due 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,” he said.

“All efforts are made to remove the restrictions by rectifying the irregularities. I know it is a difficult time for all of you and any apology may not restore the pain you are undergoing,” Thomas said in a text message to the customers.

Meanwhile, worried depositors flooded social media with complaints. “What will happen to the customers of PMC Bank. It’s our hard earned money… Customers in shock and pain. Who will answer? The bank or the RBI?” said a depositor.

Shailesh Prabhudesai, who runs an IT firm in Ratnagiri, said, “The RBI should have acted against the bank’s employees instead of punishing account holders.”

The RBI has told the bank not to enter into any compromise or arrangement and not to sell, transfer or otherwise dispose of any of its properties or assets except as notified in the RBI directions dated September 23, 2019. The RBI directions will remain in force for a period of six months from the closing of business of the bank on September 23, 2019, it said. The audit of the bank is likely to be over by then and the RBI is expected to take measures to strengthen its operations.

According to the RBI, the directions should not be construed as cancellation of banking licence.

PMC Bank has 137 branches across seven states with 81 branches in Mumbai, Navi Mumbai, Thane and Palghar regions. The bank reported net profit of Rs 99.69 crore for the year ended March 2019 as against Rs 100.90 crore in March 2018. The 14-member board of the bank is headed by S Waryam Singh.

The opposition NCP said that the RBI and government should ensure that account-holders do not lose money. The party also alleged that this development was due to the government’s “wrong economic policies”.

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