What are the restrictions RBI has placed on the PMC Bank?

The Reserve Bank of India (RBI) has placed a plethora of restrictions on the Punjab & Maharashtra Co-operative Bank Limited (PMC Bank).

Even though the RBI did not disclose the specific lapses on the part of the bank, it has been said that under-reporting of non-performing assets (NPAs) as the main reason for the regulatory action. The bank had reported 3.76 per cent of advances as gross NPAs in March 2019 but the actual NPA level is likely to be much higher.

Restrictions on the PMC Bank

• Depositors will be allowed to withdraw only Rs 1,000 of the total balance in every savings bank account or current account or any other deposit account.
• Without the prior approval of the RBI, the PMC Bank cannot grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits.
• The bank cannot enter into any compromise or arrangement and cannot sell, transfer or otherwise dispose of any of its properties or assets except as notified in the RBI directions
• The RBI directions will remain in force for a period of six months from the closing of business of the bank on September 23, 2019.

The RBI has made clear that the restrictions must not be equated as cancellation of banking licenses. The RBI is expected to undertake an audit of the bank in this 6 month period and initiate measures to strengthen the operations of the bank.