PMC Bank Crisis: RBI says there is no need to panic

Punjab & Maharashtra Cooperative (PMC) Bank, which is among the top 10 urban cooperatives, is under the scanner of RBI.


Punjab & Maharashtra Cooperative (PMC) Bank, which is among the top 10 urban cooperatives, is under the scanner of RBI. While depositors continue to protest in front of the bank and there are rumors floating regarding other cooperative banks to facing such actions in the near future.

To address this panic and to assure people that the banking system in India is still well-oiled machinery, RBI has said that “Indian banking system is safe and stable and there is no need to panic on the basis of such rumors”.

In the case of PMC bank, even Union Finance Minister Nirmala Sitharaman is playing the waiting game. Last week while addressing this issue, she said, “I will not get into this at this stage. Will wait, let there be some kind of comprehensive picture emerging post which certainly the government will have to see what best can be done". This has not been able to console the depositors that have been queuing in front of the bank every day demanding that their hard-earned money bank.

The crisis in PMC bank was first exposed on September 23, when RBI directed it to shut down its operations. In addition, a withdrawal limit of ₹1000 per customer which has been imposed. This was later increased to Rs 10,000 per account holder for a period of six months. However, most people who went to ATMs to withdraw complained that there was no money being dispensed.

It is being said that the major cause of this crisis is the exposure that the bank had to bankrupt Housing Development and Infrastructure Limited (HDIL). The total exposure to the sick real estate company is being pegged over Rs 6,500 crore. which translates to 73 per cent of its total assets worth.

In a recent report, it has also been said that there were frenetic large cash withdrawals by a few large account holders of the bank. These withdrawals were made in the third week of September that was followed by the whistleblower leak, prompting RBI to impose a strict withdrawal cap. The timing of these withdrawals certainly raises fresh questions.

On September 20 a plea has been filed in Bombay High Court challenging the restrictions imposed by the Reserve Bank of India on the bank.

The public interest litigation (PIL) was filed by an NGO Consumer Action Network and eight persons, who claimed to be depositors and account holders in the PMC Bank.

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