PMC Bank Collapse, a Nightmare for 4 Lakh Depositors

Ahead of Maharashtra Assembly elections to be held on October 21, the sudden collapse of Punjab and Maharashtra Cooperative (PMC) Bank has become a crucial poll issue, as hard-earned money of lakhs of depositors was kept under freeze, while the plethora of corruption inside the bank is emerging to be substantially massive.

Worried over their stuck money, on October 15, Fattomal Punjabi, 61, who had savings of nearly Rs 10 lakh in the PMC Bank, died from a cardiac arrest in Mulund (a suburb of Mumbai). On October 14, 51-year-old Sanjay Gulati, who had deposits of over Rs 90 lakh with the PMC, too, died of a heart attack in Mumbai. Till then, both of them were actively participating in the protest demonstrations in the state.

The Economic Offences Wing (EOW) of the Mumbai police has registered a fraud case—reporting fraud worth Rs 4355 crore—against the PMC top management and the promoters of Housing Development and Infrastructure Limited (HDIL). Reports suggest that the bank had loaned over 70% of its total loans (over Rs 9,000 crore) to the bankrupt HDIL.

So far, the EOW has arrested Waryam Singh, the former chairman of the bank, Joy Thomas, former Managing Director, Rakesh Wadhawan, HDIL chairman and managing director, and his son Sarang Wadhawan. The EOW earlier told a Mumbai court that bank officials replaced 44 loan accounts of HDIL with 21,049 fictitious accounts, to camouflage the huge loan defaults.

Although the Reserve Bank of India (RBI) has increased the withdrawal limit several times, from Rs 1,000 to Rs 10,000 and then again to Rs 25,000 and again to Rs 40,000 on October 14, it is certain that hundreds of crores of public money is under stake considering the huge corruption at the bank.

With the new relaxation, the RBI claimed that about 77% of the depositors will be able to withdraw their entire balance from their accounts. That is, of the 17 lakh depositors, around 13 lakh of them are out of the woods, but the fate of remaining 4 lakh depositors is still hanging in the balance.

Since September 24, when the RBI first barred the PMC Bank from regular business transactions for six months and restricted the withdrawal limit of the depositors to not more than Rs 1,000, worried depositors took to the streets and protested in front of all the 137 branches of the bank. As the majority of the branches are located in Maharashtra, the state government came under massive pressure due to the crisis.

As the state government is also a regulator of the urban cooperative bank, it has drawn flak from the depositors. The BJP government, perhaps, pressurised the RBI, which has unprecedentedly given relaxations—which was not the case with other cooperative banks.

The political parties in the state are, however, assuring the distressed depositors of justice during the election rallies. While the opposition Congress has called for a “white paper” on the matter, the BJP is claiming to take up the issue as a top priority post elections. NCP and Shiv Sena had earlier urged the central government to take responsibility for the matter.

In 2001, the RBI had imposed similar restrictions on Ahmedabad-based Madhavpura Mercantile Cooperative Bank after massive corruption came to light. It was after seventeen long years, in 2018, that those who had deposits upto Rs 2 lakh got their money back. And in other cases, similar directives were imposed on the Indian Mercantile Co-operative Bank Limited, Lucknow, in June 2014 and Kopal Co-operative Bank Limited, Mumbai, in March 2017. In both these cases, the RBI directives remain to continue, as the apex bank has been extending the restrictions every six months.

According to PMC Bank’s annual report 2018-19, as on March 31, 2019, the bank had total deposits of Rs 11,617.34 crore and advances of Rs 8,383.33 crore. In 2018-19, the cooperative bank posted a total revenue of Rs 1,297.98 crore. The revenue was recorded as Rs 1,170.49 crore in 2017-18.