Here's what went wrong with PMC bank

The big question that people have been asking is that, should account holders be made to suffer like this in case a bank fails? What are the safety measures in place for the money that people have in the banks?

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PMC (Punjab and Maharashtra Cooperative) Bank has been in the news since yesterday. For those unaware, The Reserve Bank of India has recently issued a notice to the Punjab and Maharashtra Cooperative Bank (PMC) to shut down its operations from September 23. In addition, there is also a daily withdrawal limit of ₹1000 per customer which has been imposed.

There has been panic all around and angry account holders have gathered around various branches demanding a refund. A picture of an elderly mother asking whether she should kill herself or/and her daughter in front of the bank had gone viral.

According to a report by Mumbai Mirror, a single loan of Rs. 2,500 crore that the bank extended to Housing Development and Infrastructure Limited (HDIL) has led to its downfall. The real estate sector in the country is going through a slowdown and that has led HDIL to go bankrupt and event resulted in the crisis that PMC finds itself currently.

RBI had been directing PMC to declare the loans given to HDIL as NPA but the bank had been paying no heed to these warning. Left with no choice now RBI has termed the loan as a “complete loss”.

The big question that people have been asking is that, should account holders be made to suffer like this in case a bank fails? What are the safety measures in place for the money that people have in the banks?

Also Read: Bank Strike Called Off After After Positive Discussion Among Authorities

While people continue to protest and demand the refund of their saving that stuck in the bank, their Managing Director of PMC Joy Thomas yesterday (September 24) issued a statement stating that he takes full responsibility of the situation and assured all the depositors that these irregularities will be rectified before the expiry of six months. He further said that it is a difficult time for everyone but urged people to cooperate.

Notably, In exercise to the powers vested on it under subsection 1 of section 35(A) of the Banking Regulation Act of 1949, the RBI directed that Punjab and Maharashtra Cooperative Bank (PMC) will close its operations from September 23, 2019 shall not, without prior approval of writing from the Reserve Bank of India grant or renew any loans or advances, make any investment, incur any liability including borrowing of funds and acceptance of fresh deposits for six months.

Also Read: Banks Will Now Pay You ₹100 Per Day For A Failed E-Payment

PMC bank had a modest beginning. It started out of one small little room in Sion Koliwada in 1984. Currently, the bank has around 137 branches in Mumbai area.

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