RBI extends restrictions on PMC Bank, eases Withdrawal Limit

The Reserve Bank of India on 19^th June 2020 has extended the regulatory restrictions imposed on the multi-state urban Cooperative Bank, Punjab and Maharashtra Cooperative Bank Limited (PMC Bank) by another 6 months. As per the earlier notice dated March 21^st, 2020, the regulatory restrictions were up to 22^nd June 2020, which now has been extended up to 22^nd December 2020.

However, the customers were provided relief in terms of withdrawal limit set by the RBI earlier in November last year as now the limit was enhanced from the earlier Rs 50,000 to Rs 1,00,000 per depositor. The RBI went on to inform that with the relaxation in withdrawal limits, more than 84 percent of the customers of the bank will now be able to withdraw the entire available balance from their accounts.

PMC Bank Crisis

Restrictions were imposed by the RBI on the PMC bank in the month of September last year under Section 35A of the Banking Regulations Act, 1949. The curbs imposed by the RBI also limited the bank customer’s withdrawal limits to Rs 1000 per depositor from 24^th September 2019 onwards, later which was increased gradually to Rs 25,000 (now increased to Rs 1 lakh per depositor).

The PMC bank crisis started when a money laundering case was filed against the bank by the Enforcement Directorate for providing loan to a financially stressed real estate company named Housing Development & Infrastructure (HDIL) from the Bhandup Branch of the bank. Despite the non-payment of the loan amount by the company, the bank officials did not classify the loan as a non-performing loan.

Month: Current Affairs - June, 2020