RBI places restrictions on Punjab & Maharashtra Co-op Bank's biz for 6 mths

Worried customers at Punjab and Maharashtra Co-operative Bank’s Kolshet branch in Thane on Tuesday. The RBI has capped withdrawals at Rs 1,000 per account | Photo: PTI
The Reserve Bank of India (RBI) has placed curbs on the activities of Mumbai-based Punjab and Maharashtra Cooperative Bank (PMC Bank) for six months following the revelation of alleged irregularities in certain loan accounts. 

According to sources, one such account is of real estate player Housing Development & Infrastructure (HDIL).  

The regulator has superseded the board and appointed a retired chief general manager of the central bank as an administrator for the troubled multi-state cooperative bank.

The RBI said a depositor would not be allowed to withdraw more than Rs 1,000 from a savings account, current account, or any other deposit account. The bank can’t grant or renew loans or advances, and invest without RBI approval.

The directions will remain in force for six months from the close of business on September 23, the RBI said in a statement.

Anxious depositors lined up outside branches of the bank. They were angry and vented their frustration on social media against the sudden stopping of withdrawal at the bank.

A senior PMC Bank official said the issue pertained to exposure to the HDIL group. While the National Company Law Tribunal had admitted HDIL for insolvency proceedings, the realty player had challenged it in the National Company Law Appellate Tribunal, which is hearing the petition.   

The official said there were differences between the regulator and the statutory auditor on the treatment of the bank’s loan to the real estate player. 

While the auditor is said to have classified it as a standard asset, the RBI has flagged it as a stressed account, making it necessary for the bank to treat it as a non-performing asset (NPA) with the accompanying burden of provisions.

Vidyadhar Anaskar, chairman of the Maharashtra State Urban Cooperative Banks Federation, a lobby group, said there should be an appellate forum for dealing with such matters where there was difference in assessments. “Auditors are professionals who follow the RBI’s norms in auditing banks, while the RBI inspector’s assessment, being the regulator, prevails,” he added.

The annual general meeting of the federation has passed a resolution, seeking such an appellate forum, in keeping with the need to be heard as natural justice, Anaskar said.

The Wadhawans, promoters of Dewan Housing Finance (DHFL) and HDIL, had links with PMC Bank in the past. The late Rajesh Wadhawan, father of DHFL chairman Kapil Wadhawan, was on the board of PMC Bank in 1987 and 1998. Waryam Singh, chairman of PMC Bank, was on the HDIL board as non-executive director and resigned in April 2015.

Sarang Wadhawan, vice-chairman and managing director, HDIL, did not respond to queries on the company’s borrowing from PMC Bank. 

Banking sources said PMC Bank was not an exception — co-operative banks are regulated by both the RBI, which clamps down on them, and the state government. Dual control complicates matters for such banks, in which local interest groups have a lot of clout. 

PMC Bank had a business of Rs 20,000 crore, comprising deposits of Rs 11,617 crore and advances worth Rs 8,383 crore, at the end of March this year.

Joy Thomas, managing director, PMC Bank, in a message to customer said: “I regret to inform you that your PMC Bank has been put under regulatory restriction by the RBI for a period of six months due to irregularities disclosed to the RBI.” 

“As the MD of the bank, I take the responsibility and assure all the depositors that these irregularities will be rectified before the expiry of six months. All efforts are made to remove the restrictions by rectifying the irregularities,” Thomas said.

However, the RBI is probing the role of Thomas in the alleged irregularities.

The RBI is investigating if there is wrongdoing on the part of anybody. 

“The administrator will now verify and validate the position of the bank and will take a call as what has to be done,” said a source.  

The multi-state-cooperative bank had gross NPAs of 3.76 per cent and net NPAs of 2.19 per cent at the end of March this year. It has 137 branches.  

The RBI said the directions should not be construed as cancellation of the banking licence. “The bank will continue to undertake banking business with restrictions till further notice/instructions. The Reserve Bank may consider modifications of these directions depending upon circumstances,” it added.

Meanwhile, the proposed merger of Mapusa Urban Cooperative Bank (MUCB), a Goa-based cooperative bank, with PMC Bank has run into trouble. It has an outstanding loan portfolio of Rs 66 crore while deposits stood at Rs 349 crore.

Gurudas B Natekar, chairman, MUCB, said with PMC Bank under RBI directions, the bank would begin discussion with other sound urban cooperative banks in Maharashtra for a possible merger.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel