It's working of bankers, not citizens; Know why Mumbai based PMC bank is under RBI's severe check and now what next!

 

Amid changing banking landscape of India, the entire industry has undergone a massive transformation that has varied the way financial procedures are carried out, and the way financial institutions operate. The collaboration between finance and the compliance has led to a radical turnaround in several aspects of banking.

 

This paradigm change has posed significant challenges to the banks as well as the regulators. One of the important challenges, being compliance, is a very important aspect for sustainable success story for any banking and financial

 

 

The Reserve Bank of India on September 24 imposed a six month ban on the Mumbai based Punjab & Maharashtra Co-operative Bank Limited on the charges of irregularities, further issuing a special guideline to monitior all the transactions of the said bank affecting the depositors at large.

 

With this, the saving, current, Fixed deposit account holders can now withdraw only Rs 1000 within six months but eventually can deposit the amount they want to secure. The Apex Bank however, has made it clear that the banking license of the PMC Bank is not cancelled and that it can continue its operations under the set restrictions.

 

 

PMC Bank is a multi state scheduled urban cooperative bank with its area of operation in the States of Maharashtra, Delhi, Karnataka, Goa, Gujarat, Andhra Pradesh and Madhya Pradesh. Founded in 1984, PMC Bank has now grown to a network of 137 branches in six states and ranks among the top 10 cooperative banks in the country.

 

A poor compliance culture undertaken by the PMC Bank here has lead it to pay heavy costs, making it ultimately difficult for the completely dependent depositors. Past a year, RBI has been issuing certain cirulars to the bank for not undertaking the central guidelines. Also the increased amount of Non Performing Assets has pushed the RBI to impose restrictions on the PMC Bank.

 

The said bank also seemingly failed to adhere to the compliance policy, ruining the clarity and transparency on the organisational level. Failure of expectations on risk, compliance and practices across the bank also adds up to the action.

 

It is very important for any bank to demonstrate a good compliance culture to maintain their reputation and win the trust of customers, investors and regulators. Such culture is important for banks to avoid poor conduct and loss of trust. Compliance risk being of legal or regulatory sanctions, material financial loss or loss to reputation, a bank may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to its banking activities.

 

 

 

1. Depositors cannot withdraw over Rs 1,000 of the total balance in any savings or current account or any other deposit account by whatever name called.

 

2. The co-operative bank cannot grant or renew any loans and advances, make any investment or incur any liability including borrowing of funds and acceptance of fresh deposits.

 

3. It further cannot disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, as per the circular.

 

4. Bank is restricted from entering into any compromise or arrangement and sell, transfer, dispose of any of its properties or assets, except to the extent or in the manner notified under the RBI directions.

 

5. The multi-state scheduled urban bank might make payments in respect to provident fund and gratuity under the circular dated September 23, but cannot incur or extinguish liabilities without the RBI’s written approval.

 

 

As cleared by the RBI, the license of the PMC bank has not yet been cancelled. Therefore, although the depositors cannot withdraw more than Rs 1000 for next six months, they can sit back to relax for their hard earned money is still safe ahead of the RBI's next circular. One thing that can be done to calm the personal critical situation is to avoid referring to the fake media hype terming the bank as 'banktrupt'.

 

These are just a set of restrictions imposed while the licence of the bank yet remains intact. Meanwhile, this move of the Reserve Banks also has nothing to do with the economic slowdown as the capital to the cooperative banks flows throug the Centre. Whatever is the reason, it is working of bankers not citizens.