PMC Bank Crisis: All you need to know
Depositors of of the Punjab and
Maharashtra Co-Operative (PMC) Bank were in rude shock as the Reserve Bank of
India (RBI) has imposed immediate restrictions on the lender's operations. With
effect from Tuesday date 24th Sept 2019, the bank has been barred
from basic banking operations such as renewing loans or granting new ones,
making investments, accepting fresh deposits or disbursing any payments except
for the salaries of its employees, electricity bills and other office expenses.
The highlight of these restrictions
is imposing the limit of Rs 1,000 imposed on withdrawals per bank account.
Read more as we explain PMC Crisis:
According to a report published
in Times of India, loan of Rs 2,500 Crore to bankrupt firm Housing Development
and Infrastructure Limited (HDIL) is the main reason behind the downfall of PMC
Bank.
The report, claimed that PMC
Bank’ did not classify the loan to the real estate company as an NPA.
However, Bank's MD, Mr. Thomas
termed this news as "incorrect", saying the amount is lower than what
was mentioned in the report.
Role of RBI
Sub-section (1) of Section 35A of
the Banking Regulation Act, 1949, have granted the Reserve Bank special powers
to freeze the operations of a cooperative bank and takeover its management
board if the lender's functioning pose a risk to the interest of the
depositors.
RBI may constitute a new board for the bank's operation and
lift the restrictions after only after the new management is able tackle the capital
crisis.
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