The Reserve Bank of India imposed a number of restrictions on the Punjab and Maharashtra Co-operative Bank (PMC Bank) on Tuesday, leading to chaotic scenes outside most of its branches in Mumbai. The regulatory restrictions imposed on the bank will be in place for the next six months with effect from September 23.
The RBI monitors the financial health of banks and issues such directions in case there are concerns over the economic health of a bank.
A multi-state cooperative banking entity, the PMC Bank has branches in Maharashtra, Delhi, Karnataka, Goa, Gujarat, Andhra Pradesh and Madhya Pradesh. Founded in 1984 in a small room in Mumbai, it has now grown to a network of 137 branches in six states and ranks among the top 10 cooperative banks in the country.
Here are some of the restrictions imposed by the apex bank:
1. Withdrawals have been capped at Rs 1,000 per account for all account holders.
2. The Punjab and Maharashtra Co-operative Bank will not be allowed to make any fresh loans. It cannot grant or renew any loans and advances, nor can the bank make any investment, without the prior approval of the RBI.
3. The bank cannot incur any liability including borrowing of funds and acceptance of fresh deposits or disburse any liabilities, without a nod from the apex bank.
4. The new directions by the Reserve Bank in connection with the PMC bank, which has a presence in multiple states are not an indication of the cancellation of its banking licence.
6. The regulatory restrictions will be in force for the next six months.
7. If account holders have any liability towards the bank, the amount in their bank accounts will be first used to adjust the relevant borrowing account.
8. The bank can renew any existing term deposit only on maturity and in the same name and same capacity only.
9. The RBI has allowed the bank to make investments only in government or SLR approved securities which mainly include cash and gold.
