"Justified Worries...": Finance Minister Speaks To RBI Chief On PMC Bank
Finance Minister Nirmala Sitharaman today reached out to customers of the troubled Punjab and Maharashtra Cooperative (PMC) Bank amid concerns over long-term freeze on withdrawing funds from the bank. The Reserve Bank of India (RBI) - following demands from angry PMC Bank customers - had thrice raised withdrawal limit from Rs 1,000 to Rs 10,000 to finally settle at Rs 25,000 for six months.
"Spoken to governor @RBI on the PMC Bank matter. He assured me that clients & their concerns will be kept on top priority. I wish to reiterate that @FinMinIndia will ensure that customers concerns are comprehensively addressed. We understand the justified worries of the customers," said the Finance Minister, who has also come under criticism from PMC Bank customers.
Spoken to governor @RBI on the #PMCBank matter. He assured me that clients & their concerns will be kept on top priority. I wish to reiterate that @FinMinIndia will ensure that customers concerns are comprehensively addressed. We understand the justified worries of the customers.— Nirmala Sitharaman (@nsitharaman) October 12, 2019
Ms Sitharaman has said multistate cooperative institutions do not come under her ministry even if they are called banks. "The RBI is their regulator and they are taking action," she said on September 30.
More than two dozen cooperative banks are now under the RBI administration, but PMC Bank - with deposits of Rs 11,620 crore as of March 31 - is by far the largest.
The former managing director of PMC Bank Joy Thomas is in police custody. The bank has accused its management of concealing bad loans leading to a loss of at least Rs 4,300 crore and camouflaging its financials. The complaint also named the bank's chairman Waryam Singh. The former senior executives of bankrupt realty firm Housing Development and Infrastructure Ltd (HDIL), Sarang Wadhwan and Rakesh Wadhwan, have been arrested.
PMC has not mentioned the loan default by HDIL in its annual report and continued to give loans despite the company being taken for insolvency. Despite HDIL not repaying, the bank officials did not classify the loans as non-performing advances and intentionally hid the information from the RBI, the police said in a statement.
Depositors at co-operative banks are in a relatively higher risk zone as the supervision and administration of these entities falls under state governments and the central bank. The central bank cannot take any action against the banks unilaterally but can suggest a plan to the state government which has the ultimate authority to decide if the bank should continue operations or be shut down.
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