RBI's decision to put regulatory restrictions on the Punjab and Maharashtra Co-operative Bank (PMC) reportedly came after inspections showed that loans offered to a real estate developer were not reported as bad loans despite the developer's financial stress. On Monday, the Reserve Bank of India (RBI) stated that PMC Bank customers can only withdraw Rs 1,000 from their accounts. This imposition is to remain for six months.
The RBI order came as a shock to lakhs of customers across six states where the bank is operational. The bank has over Rs 11,000 crore in deposits from its customers across 137 branches.
According to a report in Mumbai Mirror, the biggest reason behind RBI's restrictions was PMC Bank's loan of Rs 2,500 crore to now-bankrupt real estate firm Housing Development and Infrastructure Limited (HDIL). The daily mentioned that the bank did not classify the loan to HDIL as NPA despite the firm's default on repayments. Eventually, RBI took stock of the situation and termed the loan as "complete loss", the report mentions.
The daily quoted a source stating RBI's restrictions on PMC Bank shows the central bank felt the loan was a complete loss. Had the apex bank not felt so, it would have asked PMC Bank to make provision for 10 per cent of the total loan, the source added.
The co-operative bank had posted a net profit of Rs 99.69 crore in FY19 as against Rs 100.90 crore reported in a year-ago period, registering a marginal decline of 1.20 per cent. However, the PMC Bank's total income rose by 10.89 per cent to Rs 1,297.98 crore versus Rs 1,170.49 crore in the previous year. While the total advances of the bank increased 12.86 per cent year-on-year (y-o-y) to Rs 8,383.33 crore, total deposits climbed 16.89 per cent to Rs 11,617.34 crore during the financial year ended March 31, 2019.
PMC Bank's Managing Director said that RBI's restrictions came after divergences in NPAs but maintained that the action taken by the apex bank was too harsh. He also said that the depositors' money was safe with the bank and they would come out of the situation soon to repay the customers.