The Reserve Bank of India’s move to
take charge of one of the country’s top five co-operative banks on
September 24 has left thousands of depositors in the lurch and sparked
renewed concerns about the health of India’s troubled banking sector.
Depositors of the Punjab and Maharashtra Co-operative (PMC) Bank were informed they can withdraw only a sum of Rs 1,000 from their bank account over the next six months, while the bank itself has been put under the direction of the central bank and barred from renewing, or granting any loans, or making fresh investments without the RBI’s approval.
The sudden move caused PMC Bank depositors to panic and led to protests and long queues outside the bank’s branches. It has 137 branches spread across seven states.
Thousands of depositors stood outside branches demanding answers about their life’s savings.
India has more than 1,500 small urban co-operative banks that typically service small local communities in certain districts or states.
More than two dozen of these co-operative banks are now under RBI administration, but PMC Bank - with deposits of Rs 11,617 crore as of March 31 - is by far the largest to be hit by such RBI measures.
Its plight has also raised fresh fears about the broader Indian banking sector that has been rocked by a multi-crore fraud at a state-run lender, the collapse of a major infrastructure lender, bad loan issues at state-run banks and a liquidity squeeze that has hit shadow lenders.
PMC Bank itself sought to calm depositors and managing director Joy Thomas, in a text message to customers, attempted to reassure them that the bank’s issues would be resolved within six months.
“We have ample assets to cover all our liabilities towards the depositors. All my loans are backed by adequate securities. It is just a question of time,” Thomas said.
Still, depositors remained unconvinced and bank employees were despondent.
“Our staff has worked hard to win the confidence of clients over the years. After this incident, it will be very difficult to revive that confidence,” said Sonia Malik, a branch manager at a PMC Bank outlet in New Delhi, adding employees are worried about their jobs.
Depositors of the Punjab and Maharashtra Co-operative (PMC) Bank were informed they can withdraw only a sum of Rs 1,000 from their bank account over the next six months, while the bank itself has been put under the direction of the central bank and barred from renewing, or granting any loans, or making fresh investments without the RBI’s approval.
The sudden move caused PMC Bank depositors to panic and led to protests and long queues outside the bank’s branches. It has 137 branches spread across seven states.
Thousands of depositors stood outside branches demanding answers about their life’s savings.
India has more than 1,500 small urban co-operative banks that typically service small local communities in certain districts or states.
More than two dozen of these co-operative banks are now under RBI administration, but PMC Bank - with deposits of Rs 11,617 crore as of March 31 - is by far the largest to be hit by such RBI measures.
Its plight has also raised fresh fears about the broader Indian banking sector that has been rocked by a multi-crore fraud at a state-run lender, the collapse of a major infrastructure lender, bad loan issues at state-run banks and a liquidity squeeze that has hit shadow lenders.
PMC Bank itself sought to calm depositors and managing director Joy Thomas, in a text message to customers, attempted to reassure them that the bank’s issues would be resolved within six months.
“We have ample assets to cover all our liabilities towards the depositors. All my loans are backed by adequate securities. It is just a question of time,” Thomas said.
Still, depositors remained unconvinced and bank employees were despondent.
“Our staff has worked hard to win the confidence of clients over the years. After this incident, it will be very difficult to revive that confidence,” said Sonia Malik, a branch manager at a PMC Bank outlet in New Delhi, adding employees are worried about their jobs.
