RBI yet to explain its move against PMC Bank

25 Sep 2019


Punjab and Maharashtra Co-operative Bank (PMC Bank), which is under RBI administration, has seen a big jump in its stressed assets, forcing the lender to sell bad loans to CFM Asset Reconstruction for Rs 105 crore in the 2018-19 fiscal.

But what actually ails the urban co-operative bank, one of the largest in the country, is still not clear.
RBI merely said, “The directions are imposed in exercise of powers vested in the Reserve Bank under Sub-section (1) of Section 35A of the Banking Regulation Act, 1949 read with Section 56 of the said Act,” adding that it should not be seen as a cancellation of the banking license.
Some reports indicate that the bank may either have given fraudulent loans or not disclosed non-performing assets (NPAs) properly. RBI’s silence has only helped rumours to spread, causing panic to customers.
RBI-appointed officer JB Bhoria is currently overseeing the working of PMC Bank. It is unclear whether RBI has taken over the management of the bank or is merely overseeing in the interim ahead of RBI loosening restrictions.
In the annual report, the bank has highlighted that the bank had gross non-performing assets (GNPA) of Rs148 crore in the beginning of FY19, which shot up to Rs315 crore (3.76 per cent of loans) by the end of the fiscal, leading to a sharp jump in NPA provisioning. The bank’s profit had fallen by a marginal 1 per cent to Rs99 crore in FY19.
As of March 2019, PMC Bank had a deposit base of Rs11,600 crore, which included Rs2,300 crore in savings and current account deposits and Rs9,300 crore in fixed deposits. 
PMC Bank’s advances stood at Rs8,383 crore as of March 2019, an increase of about 13 per cent over the previous year. The year also saw an increase its realty exposure, especially through credit linked subsidy scheme – Pradhan Mantri Awas Yojana (PMAY) as part of its focus on priority sector lending tomeet RBI lending norms.
The bank had Rs984 crore exposure to advances against real estate, construction and housing in FY19. PMC bank also claimed a total amount of Rs3.69 crore in subsidy claims from NHB under the scheme during the year. 
The bank, however, ended the year with Rs303 crore addition to a bad loan book of Rs148 crore.
PMC Bank has a network of 137 branches across 7 states- 81 in Maharashtra alone.
The RBI’s directions on the Punjab and Maharashtra Co-operative Bank (PMC) may not be a one-off case. The regulator has, in the past, imposed similar sanctions on other banks, especially co-operative banks.
This month, it extended such sanctions under Section 35 (A) to Osmanabad-based Vasantdada Nagari Sahakari Bank, Vithalrao Vikhe Patil Co-operative Bank in Nashik and Karad Janta Sahakari Bank.
In May this year, it had imposed financial curbs on Goa-based The Madgaum Urban Co-operative Bank and capped withdrawals by account holders at Rs 5,000.
RBI also, earlier this month, withdrew similar directions it had imposed on Lucknow-based Indian Mercantile Co-operative Bank, after extending the restrictions from time to time.

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