Maharashtra govt suggests merger of troubled PMC Bank with MSC Bank

The state government will speak to Reserve Bank of India (RBI) on the issue of merger of the Maharashtra State Cooperative (MSC) and PMC banks. Photo: PTI File.

The Maharashtra government on Thursday (December 5) suggested a merger of the scam-hit Punjab and Maharashtra Cooperative (PMC) Bank with the Maharashtra State Cooperative Bank in a bid to provide relief to depositors of the troubled lender, state minister Jayant Patil said on Thursday (December 5).

If the need be, the state government will speak to Reserve Bank of India (RBI) on the issue of merger of the Maharashtra State Cooperative (MSC) and PMC banks, he said.

Also read: 78% depositors of PMC Bank can withdraw entire deposits: Sitharaman

“I spoke to the MSC Bank chairman day before yesterday. We have suggested the MSC Bank to try to merge the PMC bank with it so that the poorest of its depositors get relief,” Patil said.

The PMC Bank has been put under restrictions by the RBI, after an alleged Rs 4,355 crore scam came to light following which the deposit withdrawal was initially capped at Rs 1,000, causing panic and distress among depositors.

Also read: Will probe why RBI audit missed irregularities in PMC bank: Mumbai CoP

The withdrawal limit has been raised in staggered manner to Rs 50,000. At least eight depositors, who had high quantum of money stuck with the bank, died in the last couple of months, including one who committed suicide.

“We want to assure the PMC Bank depositors that the government stands with them. The merger of the two banks will definitely help small depositors,” the minister said.

Patil, who has earlier been finance minister of the state, said the MSC Bank’s health is good and there should be no problem in case the PMC Bank is merged in it.

The Maharashtra NCP chief also said that the process may take around one-and-a-half months to complete. The PMC Bank, which has around 16 lakh depositors, was placed under an RBI administrator on September 23 for six months due to massive under-reporting of dud loans.

Also read: Three PMC Bank depositors succumb to stress-related deaths

The bank, over a long period of time, had given more than Rs 6,700 crore in loans to the Housing Development and Infrastructure Ltd (HDIL), which is 73% of its total advances, and which turned sour with a shift in the fortunes of the now bankrupt company. Its total loans stand at around 9,000 crore and the deposits at over Rs 11,610 crore. There have been massive protests across city from the PMC Bank depositors following the RBI action.

Twelve people, including top officials of the PMC Bank and HDIL, have so far been arrested by Mumbai Police’s Economic Offences Wing (EOW) in connection with the scam. The EOW suspects a nexus between some of the accused and HDIL, whose mammoth loan defaults are said to have caused a liquidity crisis at the bank, leading to appointment of administrator by RBI and restrictions on withdrawal of funds.

(With inputs from agencies)