- Editor's View
- 3 min read
PMC Depositors: Who mowed my money?
“What has happened to PMC is absolutely unexpected. In the meetings, RBI used to show PMC as a role model to other cooperative banks. And no one expected something like this.” said a former banker who headed a cooperative bank.
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Sachin Palkar, received a message on Tuesday in the morning from Punjab and Maharashtra Cooperative bank (PMC), that he can withdraw only ₹1,000. When he reached his branch at Sion, bank officers confirmed the text message. Sachin has his account with this bank since more than a decade and all his life savings are with the same bank. With ₹1,000 he cannot run his house and survive. There are lakhs of customers like Sachin who have deposited more than Rs 11,000 crore out of 137 branches of the PMC. Most of the branches are in Mumbai and adjoining districts, but also in Goa, Madhya Pradesh, Karnataka, Gujarat and Delhi.
Today, the branches were filled with thousands of depositors like Palkar asking for their money. They were crying, feeling helpless, panicking, and didn't know what to do, because there was a lack of information. And more importantly, they didn't know when they would get their money back. Being cooperative banks, most of the depositors are from lower middle class and many of them include household helps, small vendors, senior citizens, who have, with a trust, deposited their life time savings in the bank.
Was Bank fabricating its numbers?
Why did RBI suddenly issue directions to PMC? It’s merely a half-a-page document that directed bank not to lend, borrow or even allow customers to withdraw more than ₹1,000. RBI has given a time frame for six months but what is it that RBI has uncovered in banks passbooks that RBI took over the bank? What if the situation doesn’t improve in six months?
According to the bank's annual report published in March 2019, it has made a profit of ₹100 crore and net NPA was 2.19% and gross NPA was 3.76%. The numbers don’t look bad, but are the numbers true is the question that experts have raised. As of now the truth is known to only RBI and PMC. But lack of clarity has given birth to speculations, guesses and confusion, which has added to the pain of the depositors. It can be speculated that the bank could have surpassed the limits of its real estate loans which made RBI thought that this might convert the bank into an NPA and would be tough for the bank to manage. Also, there is a buzz that the chairman of the bank had a conflict of interest.
PMC: From top to bottom
PMC is a 35 year-old bank and over the years, it has built a strong network. It comes under top five of the cooperative banks.
A former banker who headed a cooperative bank said, “What has happened to PMC is absolutely unexpected. In the meetings, RBI used to show PMC as a role model to other cooperative banks. And no one expected something like this.”
If PMC was a role model, why and how its role changed? But it’s really important to find new ways to uncover such under & wrong reporting activities. Because RBI conducts timely inspections , banks have auditors, but there is no guarantee that such cases will not repeat. In fact, in most cases things came into light only when the system was compromised. Are we serious about periodic audits or inspections?
PMC’s tale is a major setback for the entire banking system. Currently, the banking sector is going through a tough time, due to various reasons. Whether NBFC crisis or NPA recovery followed by insolvency and bankruptcy process (IBC). Also, low credit growth and liquidity is a major challenge. Under such circumstances, PMC is another addition to the sentiment, because in this story, customers, more importantly poor people are party who doesn’t know how to run the house tomorrow, because whatever they earned is with the bank that’s not operational.
Today, the branches were filled with thousands of depositors like Palkar asking for their money. They were crying, feeling helpless, panicking, and didn't know what to do, because there was a lack of information. And more importantly, they didn't know when they would get their money back. Being cooperative banks, most of the depositors are from lower middle class and many of them include household helps, small vendors, senior citizens, who have, with a trust, deposited their life time savings in the bank.
Was Bank fabricating its numbers?
Why did RBI suddenly issue directions to PMC? It’s merely a half-a-page document that directed bank not to lend, borrow or even allow customers to withdraw more than ₹1,000. RBI has given a time frame for six months but what is it that RBI has uncovered in banks passbooks that RBI took over the bank? What if the situation doesn’t improve in six months?
According to the bank's annual report published in March 2019, it has made a profit of ₹100 crore and net NPA was 2.19% and gross NPA was 3.76%. The numbers don’t look bad, but are the numbers true is the question that experts have raised. As of now the truth is known to only RBI and PMC. But lack of clarity has given birth to speculations, guesses and confusion, which has added to the pain of the depositors. It can be speculated that the bank could have surpassed the limits of its real estate loans which made RBI thought that this might convert the bank into an NPA and would be tough for the bank to manage. Also, there is a buzz that the chairman of the bank had a conflict of interest.
PMC: From top to bottom
PMC is a 35 year-old bank and over the years, it has built a strong network. It comes under top five of the cooperative banks.
A former banker who headed a cooperative bank said, “What has happened to PMC is absolutely unexpected. In the meetings, RBI used to show PMC as a role model to other cooperative banks. And no one expected something like this.”
If PMC was a role model, why and how its role changed? But it’s really important to find new ways to uncover such under & wrong reporting activities. Because RBI conducts timely inspections , banks have auditors, but there is no guarantee that such cases will not repeat. In fact, in most cases things came into light only when the system was compromised. Are we serious about periodic audits or inspections?
PMC’s tale is a major setback for the entire banking system. Currently, the banking sector is going through a tough time, due to various reasons. Whether NBFC crisis or NPA recovery followed by insolvency and bankruptcy process (IBC). Also, low credit growth and liquidity is a major challenge. Under such circumstances, PMC is another addition to the sentiment, because in this story, customers, more importantly poor people are party who doesn’t know how to run the house tomorrow, because whatever they earned is with the bank that’s not operational.
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