The Reserve Bank of India on Friday raised the PMC(Punjab and Maharashtra Cooperative) bank withdrawal limit for the depositors of crisis-hit to Rs 1 lakh from Rs 50,000. While the RBI has also extended regulatory restrictions for 6 months that is from June 23 to December 22, 2020. The decision was taken by the RBI as the resolution process of the lender has been affected by the COVID 19-induced lockdown.
PMC Bank’s activities were curbed in September last year after the RBI found financial irregularities, and misreporting of loans given to real estate developer HDIL.
The curbs were placed under Section 35A and Section 56 of the Banking Regulation Act, which allows the banking regulator to impose restrictions on business activities banks, including cooperative lenders, to protect the interest of depositors.
This is the second such extension by RBI after no resolution was found for the crisis-hit bank.
A press release issued by RBI on Friday said, “Further, on a review of the bank’s liquidity position, its ability to pay the depositors and with a view to mitigating the difficulties of the depositors during the prevailing COVID-19 situation, it has also been decided to further enhance the limit for withdrawal to Rs 1,00,000 (Rupees One Lakh only) per depositor, inclusive of Rs 50,000 allowed earlier.”
“The process has been affected due to the lockdown on account of COVID 19 and the continuing uncertainty around the pandemic. Further, the extent of the negative net worth of the bank, and the legal processes involved in the recovery of bad debts also pose challenges/limitations in the resolution of the bank,” RBI said.
While the RBI continues consultations with various stakeholders to find a solution, it has decided to extend the directions for another six months till the end of the year.
The regulator has also gradually been increasing the withdrawal limit for the bank’s depositors, starting from Rs 10,000 per borrower to now Rs 1 lakh.
“With the above relaxation, more than 84% of the depositors of the bank will be able to withdraw their entire account balance,” RBI stated.
On May 29, the Delhi High Court had directed the bank and RBI to consider the needs of depositors during the COVID-19 induced lockdown, and ease the withdrawal limit.
The economic offense wing of Mumbai Police and the Enforcement Directorate are currently looking into the fraud at the bank, and have registered offenses against the bank’s officials as well as promoters of HDIL.
