The Reserve Bank of India (RBI) has extended the restrictions on the troubled Punjab and Maharashtra Cooperative (PMC) Bank by three months till March 31, 2021.
Meanwhile, the bank has informed RBI that it has received four proposals from investors to revive the bank in response to the expression of interest (EoI) it had invited.
“These proposals will be examined by the bank with regard to their viability and feasibility taking into account the best interest of the depositors. To undertake this process, the bank would need some more time,” the RBI said.
The bank had invited EoI from eligible investors for investment/ equity participation for its reconstruction. The last date for submission of EoI was December 15, 2020.
“Subsequent to commencement of the normal day-to-day operations, it will be open for the investor(s) to convert the bank into a small finance bank by making an application to the Reserve Bank of India subject to compliance of the central bank guidelines on voluntary transition of primary (urban) co-operative banks (UCBs) into SFBs dated September 27, 2018,” the EoI document of the bank had said.
And, it had also specified that the investor has to bring in enough capital for the bank to achieve the minimum required capital to risk weighted assets ratio (CRAR) of 9 per cent.
Last year in September, RBI superseded the board of the bank and placed restrictions on it following revelations of alleged irregularities in certain loan accounts. It was revealed that of the more than Rs 8,000 crore of the bank’s advances, more than Rs 6,000 crore is the exposure to the HDIL Group.
Upon investigations, it was found that, the then management was concealing information from the board, auditors, and regulators, and replacing stressed accounts with dummy accounts. While the bank almost relied solely on the company (HDIL) for growth, the real estate firm used the bank for its funding needs and to keep its accounts with other banks healthy.
Initially, deposit withdrawal was capped at Rs 1,000, which has been raised to Rs one lakh now.
“The bank has already initiated actions for recovery of bad debts, including accounts of HDIL group. We have intensified our recovery efforts through close follow up, settlements and legal action as appropriate”, the administrator, A K Dixit, in a letter to the customers had said last month.
The multi state cooperative bank registered a net loss of Rs 6,835 crore during FY20 and has a negative net worth of Rs 5,850.61 crore. As of March 31,2020, it had a deposit base of Rs Rs 10,727.12 crore and advances to the tune of Rs 4,472.78 crore and gross non-performing assets (NPAs) worth Rs 3,518.89 crore.