No Funds Available: Depositors at Indian bank PMC survive on loans, charity

MUMBAI / NEW DELHI (Reuters) – In February, 82-year-old Kishan Lal asked India’s finance minister for help, saying in a Twitter message that he was ready to donate his kidney and eyes if anyone could help organize the funds. to treat his daughter, who had a brain tumor.

Kishan Lal, 82, poses for a photograph inside his home in Mumbai, India on August 19, 2020. REUTERS / Hemanshi Kamani

The Lals had enough savings to overcome the medical crisis: more than 2.5 million rupees ($ 33,450) in the Punjab & Maharashtra Co-operative (PMC) Bank. But withdrawals were limited to 50,000 rupees from each account at the time because the authorities were investigating fraud at PMC.

The withdrawal limit is now 100,000 rupees per depositor.

“I just borrowed money wherever I could, I had to save my daughter,” Lal said. “If I had had access to my money, I wouldn’t have been ashamed.”

The Reserve Bank of India (RBI) took over PMC last September after it was accused of fraud and concealing bad loans. Senior PMC officials and the owners of a real estate company that received most of the loans were arrested.

The withdrawal limit has left many of the more than 900,000 PMC depositors in dire straits. Some say they are struggling to cancel loans or pay their children’s school fees, while others say they depend on friends for their groceries.

The situation at PMC has also amplified the health concerns of India’s tens of thousands of cooperative banks, which often serve communities in inland rural areas and have assets worth approximately $ 220 billion, about 11% of the total. total assets of the Indian banking sector.

These banks, many of which are tiny, are subject to less strict regulation than commercial banks, and currently, more than two dozen of them are subject to lending or withdrawal restrictions by the RBI due to financial irregularities.

The coronavirus has hit the broader banking sector hard, raising concerns about the surge in bad loans as household and corporate debt rises. Liquidity risks have increased for non-bank financial companies and the state banking system needs to be recapitalized.

But some analysts worry that the pandemic may have a more pronounced effect on fragile cooperative banks.

“They are lending to riskier borrowers who are more likely to default due to the pandemic,” said Jignesh Shial, a banking analyst at brokerage Emkay Global.

Asked about the delay in resolving PMC’s problems, Jai Bhagwan Bhoria, an administrator appointed by the RBI to revive the bank, told Reuters: “Recovery is an ongoing process and takes time for actual accomplishments due to legal steps. and obstacles faced “.


The PMC crisis has also sparked court battles. In one of them, Sandeep Bhalla, whose parents have nearly 10 million rupees locked in PMC, told the Delhi High Court that PMC’s depositors were “discriminated against” compared to those of commercial lender Yes Bank.

In March, the RBI imposed a limit of 50,000 rupees on withdrawals from Yes Bank, India’s fifth-largest asset bank, after its finances deteriorated.

But less than 24 hours later, the finance minister announced that India’s main state bank, SBI, would infuse Yes Bank and that withdrawal limits would subsequently be removed.

The finance ministry told the court that the government had not infused funds into Yes Bank, but it was the investors and the SBI that came to its rescue, according to court documents. SBI is 57% government owned.

The judge was not convinced.

Noting that the PMC depositors were in a “dire state,” the court said the RBI and the finance ministry played a crucial role in the Yes Bank bailout and asked both of them to “delve into the aspect” of the reason for which PMC depositors were treated differently.

The RBI told the court that the two lenders were “fundamentally different,” including the different regulations governing them. He also said that with PMC’s “really precarious financials,” no investor was willing to bail him out.

The finance ministry said the RBI had bailed out Yes Bank as it deemed it necessary in the interest of the public and depositors, but the central bank had not proposed any such bailout for PMC.

The next court will consider the case in mid-September, just before the first anniversary of the PMC collapse.

Asked for further comment, the finance ministry submitted Reuters questions to the RBI, which did not respond.


Established in 1984, PMC is a regional lender with 137 branches in six states and had deposits of $ 1.5 billion in the past year. Yes Bank is much larger with over 1,000 branches across India.

Many depositors said they were unaware of the different regulatory structures for banks and believed PMC was like any other commercial lender.

“If it wasn’t sure, why did you call it a bank?” asked Pooja Chaudhary, 26, who said he had to fight for hours last month to secure custody of his father’s body after a hospital refused to release him until his medical bills cleared.

“My father died, and I couldn’t even cry,” said Chaudhary, whose savings of 1.5 million rupees were locked into PMC.

Earlier this month, dozens of PMC depositors staged a protest in Mumbai and shouted slogans against the central bank.

“Get well soon RBI. Thank you for doing your job so well that we have lost all our life savings, “reads a poster.

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On Facebook, depositors regularly post videos and photos to amplify their call for help. Every day, hundreds of messages are shared on a group of Telegram messaging apps of around 4,000 members where depositors discuss next steps or just let off steam.

Kishan Lal and his daughter Bony say they remain at the mercy of the loans. Lal said he has developed a prostate problem but is not treating it and is skipping his regular blood pressure medications as his savings get stuck at PMC.

Bony, 43, is distraught as she battles her own illnesses. “It’s our hard-earned tax money,” he said, “and we have to literally beg for it.”

Reportage by Abhirup Roy in Mumbai and Aditya Kalra in New Delhi; Editing by Raju Gopalakrishnan

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