14 months on, Punjab and Maharashtra Co-operative Bank depositors yet to get RBI relief on withdrawals

Fourteen months on, there is no relief to around 17 lakh depositors of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank. On September 23, 2019, the RBI moratorium on the bank had barred the depositors from withdrawing money from all the 137 branches in six states.

The apex bank regulator had first capped the withdrawal limit at Rs1,000. Later, depositors were allowed to withdraw money upto Rs50,000 in a six-month period, which was further increased to Rs1 lakh till December 22, 2020.

PMC Bank’s top management is accused of unlawfully sanctioning around 73% of the bank’s loans to Housing Development Infrastructure Ltd (HDIL) group of companies and favouring its promoters Rakesh Wadhawan and his son Sarang. The bank allegedly concealed HDIL’s non-performing assets (NPAs) from RBI.

The depositors, who constitute over 37% senior citizens, said they are facing a financial crisis. According to the depositors, the RBI administrator informed them that the documents of the assets mortgaged with the bank are not in order and hence, their auctioning has been delayed, owing to which, the central bank is unable to provide any relief to the depositors.

Nikhil Vora, 51, who represents the PMC Depositors’ Association, said, the RBI is “lethargic” in its approach.

“In the past 14 months, RBI failed to auction the assets of the accused mortgaged with the bank and recover money. The apex regulator could not detect the irregularities in the documents while scrutinising them and now despite learning about the wrongdoings, they are not doing anything. Why would citizens trust the banking system?” said Vora, whose lifetime earnings are stuck in the bank.

“The depositors have explored all the options – from meeting ministers to politicians to suggesting RBI all the possible measures to bring the bank back on track. However, all the efforts have gone in vain. For the past 14 months, the depositors are left to die. The elderly depositors have all of their life savings in the bank and were running their homes on the interest they used to get from the bank. They are now living under tremendous financial stress which worsened owing to the Covid-19 pandemic. Since the time the restrictions were imposed on the bank, 95 people (depositors or their kin) have died, of which four died by suicide,” added Vora.

Another depositor, Anita Lohiya, said that RBI resolved similar issues pertaining to Yes Bank and Laxmi Vilas Bank in no time, but is not “concerned” about the lakhs of depositors of PMC Bank.

“After deaths of more than 90 depositors, the RBI has not woken awakened. This is so frustrating for us. The finance minister said that now cooperatives banks are at par with commercial banks and the RBI has the power to save them. Yes Bank was saved in 13 days, while Lakshmi Vilas Bank will be saved in a month, but it’s been 14 months since PMC Bank depositors are facing problems. Passing the Banking Regulation (Amendment) Act in the Parliament was just a waste of time.”

She said the depositors will sit on a hunger strike for 10 days from Tuesday opposite the RBI headquarters. “If the central bank fails to resolve the issue even after that, then the depositors will be on indefinite hunger strike,” added Lohiya.

Initially, the depositors were hopeful that the prompt action taken by the city police’s economic offences wing (EOW) would lead to the recovery of money from the accused, but nothing fruitful came out.

“The police have far lesser scope for recovery in such a banking fraud. EOW has already shared details of the assets of the accused linked to the irregularities at the bank to the RBI administrator. The recovery of money by auctioning the mortgaged properties is the [central] bank’s duty and not of the police. So it would not be correct to expect recovery in the case from police. But we will ensure that the offenders are prosecuted,” said an EOW officer.

Fifteen people have been arrested in the case so far.

“While one accused has been granted on medical grounds, 14 of them are in jail. We have filed three charge sheets in the case, detailing the role of all the accused behind the fraud. The roles of the top management of the bank, its directors, officials, evaluators and auditors have been clearly established in the investigation. Sufficient evidences were collected. The two accused who were rejected anticipatory bail from the courts are to be arrested. Forensic auditing is still going on and we are recording of statements of key witnesses before the magistrate,” said senior police inspector, Kishore Parab from EOW, who is the chief of the special investigation team probing the case.

RBI said that the efforts to revive the bank are on.

In the first week of November, the RBI administrator for PMC Bank, AK Dixit, had invited expressions of interest from prospective equity investors to identify a suitable investor or group of investors willing to take over the management control to revive the bank. The new investors could be financial institutions, including banks and Non-Banking Financial Company (NBFCs), micro-finance institutions controlled by residents, individuals, companies, societies, trusts or any other such entities.

The administrator was forced to reach out to potential bidders to bail out the troubled lender with a minimum capital infusion of ₹3,500 crore. The decision to go for an open bidding process was prompted by PMC Bank’s failed attempts to receive any interest from other lenders as cooperative banks and scheduled commercial banks refused to bail out PMC Bank.

PMC Bank had deposits worth ₹10,727.12 crore and advances of ₹4,472.78 crore and gross non-performing assets worth ₹3,518.89 crore as on March 31. Its share capital was ₹292.94 crore, and it registered a net loss of ₹6,835 crore in financial year 2019-20. The bank also has a negative net worth of ₹5,850.61 crore.

Dixit wrote a letter to all the depositors, assuring them that a “meaningful resolution” is his top priority. “The bank has already initiated actions for the recovery of bad debts, including accounts of the HDIL group. We have intensified our recovery efforts through close follow up, settlements and legal action, as appropriate. We have taken aggressive steps to control costs and cut expenses. Branch network is being rationalised, premises are being surrendered and rents are being re-negotiated down,” stated his letter.

He also assured depositors that he and his team are working in their best interest and that various options are being considered and discussions with different entities are going on.

Dixit did not respond to phone calls or messages.

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