Customers panic after RBI intervention in PMC Bank
Panic-stricken customers have been gathering in front of Punjab & Maharashtra Cooperative Bank (PMC Bank) branches after the Reserve Bank of India (RBI) restricted withdrawals.twitter

The Reserve Bank of India's intervention in the functioning of the Mumbai-based Punjab and Maharashtra Cooperative Bank with 137 branches across several states has caused panic among the depositors and other stakeholders. Bank customers have been gathering in front of the bank branches and demanding their deposits back. Here is all you wanted to know about the developments.

What is PMC Bank?

The Mumbai-headquartered PMC Bank, short for Punjab & Maharashtra Cooperative Bank, is an urban cooperative commercial bank. It has a presence in Maharashtra, Delhi, Karnataka, Goa, Gujarat, Andhra Pradesh, and Madhya Pradesh through its 137 branches. The bank's deposits total Rs 11,617.34 crore and loans Rs 8,383.33 crore.

Why is PMC Bank in the news now?

India's apex banking regulator Reserve Bank of India (RBI) has placed PMC Bank under major restrictions. This development has affected the bank,s day-to-day functioning, and the customers.

Why did the RBI intervene?

The RBI auditors have found serious discrepancies in the bank's accounts including the reporting of bad loans and non-performing assets (NPA). While the bank showed in its FY19 annual report gross bad loans amounting to 3.76 percent of its advances, reports suggest the figure is much higher, endangering the bank's existence. There are also reports of alleged irregularities in the bank's functioning.

What do these restrictions mean for the bank's day-to-day operations?

Under Section 35A of the Banking Regulation Act, the RBI has limited cash withdrawals from the bank to Rs 1,000 for six months to prevent a run on the bank until the issues are resolved and the bank is brought back on an even keel. Thank bank will not be able to process or disburse applications for new loans.

PMC Bank website displays RBI notification
Punjab & Maharashtra Bank (PMC Bank) website displayed the Reserve Bank of India (RBI) directive restricting the bank's operations on its website.

What does future hold for PMC Bank?

If the RBI fails to clean up the books and make PMC Bank operations viable once again, there is a likelihood of it initiating a merger of the troubled bank with another healthier bank. There have been precedents of similar action taken under after the RBI's Section 35A intervention, which is often done to prevent developments that are detrimental to the interests of the customers from happening. The RBI will review the situation after six months before taking a decision on a possible merger.

Are there any likely candidates for the PMC Bank's merger?

There have been reports that PMC Bank may be merged with Goa-based Mapusa Urban Cooperative Bank.

Will PMC Bank customers loss their deposits?

It is unlikely that the customers will have to suffer because the RBI's intervention has been timely.