On June 20, RBI extended regulatory restrictions on PMC (Punjab and Maharashtra Cooperative) bank for another six months. However, it has now raised the withdrawal limit for depositors to 1 lakh from the previous Rs 10,000. RBI has put restrictions on activities of PMC bank from last September after it found financial irregularities and misreporting of loans given to real estate developer HDIL. The restrictions were imposed under 35A and Section 56 of the Banking Regulation Act.
The recent decision to extend restrictions on the cooperative lender has been taken after no resolution was found to resolve the issue. Though RBI is continuing to explore the possibility for a resolution and has been engaging with the stakeholders to get a deal done.
RBI said, “It is hereby notified for the information of the public that the validity of the aforesaid Directive dated September 23, 2019, as modified from time to time, has been extended for a further period of six months from June 23, 2020, to December 22, 2020, subject to review”.
It added, “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 that the relaxation provided to depositors by extending the withdrawal amount will help, “more than 84% of the depositors of the bank will be able to withdraw their entire account balance”. The decision to relax the withdrawal amount came after Delhi High Court directive to do so.
Meanwhile, ED and the economic offence wing of Mumbai Police are continuing to look into the fraud involving the bank and HDIL.