PMC Bank administrator to assess damage, take action

MUMBAI: The Reserve Bank of India (RBI)-appointed administrator of Punjab and Maharashtra Co-operative Bank Ltd (PMC), JB Bhoria, on Wednesday said his role will be to find out the extent of damage and take appropriate action. As an administrator, he will take over as the chairman of the board of directors. However, his powers in terms of running the business are limited, considering that the RBI has already put restrictions on the bank’s business.

On Tuesday, the RBI capped the withdrawal amount from the cooperative bank at ₹1,000 per account for six months. The bank has also been banned from disbursing fresh loans or accepting deposits.

“We will have to find out whether we can take additional security from borrowers or whether the management was hand in glove with those people,” said Bhoria.

Gross under-reporting of bad loans is a key reason for the restrictions on PMC. While the bank’s gross bad loans, according to its FY19 annual report, were at 3.76% of its advances, it has now disclosed that the figure is much higher. The RBI is looking into the books of the bank. There are also reports that the bank had huge exposure to stressed real estate companies, which defaulted on repayments.

In the past, RBI ensured that depositors’ money was returned fully by selling the assets of a bank, Bhoria said. The Deposit Insurance and Credit Guarantee Corp. offers insurance cover to individual deposits of up to ₹1 lakh.

However, past instances have also shown that liquidation of a bank’s assets is a long drawn process.

In 2001, when Ahmedabad’s Madhavpura Mercantile Cooperative Bank went bust, nearly 210 urban cooperative banks, which had parked their money with the entity, were in trouble and some of them even had to be liquidated. Depositors received their money nearly 17 years after the ₹1,200 crore scam hit the cooperative bank.

DNA had reported on October 2, 2018 that individual depositors have so far received only 52% of their money and UCBs have received 28% of their deposits back.

Similarly, nearly 150,000 depositors and account holders of CKP Cooperative Bank are still waiting to receive their money after the RBI put the bank under Section 35 (A) of the Banking Regulation Act in May 2014 following the supersession of the board of directors in May 2012. These depositors have been stopped from withdrawing the balance amount for the last five years.