Lok Sabha Question No. 110 (UNSTARRED), answered on 2020-02-03
Subject: Restrictions on Cash Withdrawal in PMC Bank
Ministry: FINANCE
Asked by: S. Jothimani

## Government of India Ministry of Finance

## Department of Financial Services

To be answered on Monday, February 3, 2020/Magha 14, 1941 (Saka)

## LOK SABHA Unstarred Question No. 110 Restrictions on Cash Withdrawal in PMC Bank

MS. S. JOTHIMANI:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has received representations from account holders of the Punjab and Maharashtra Cooperative Bank in light of restrictions on cash withdrawals, if so, the details thereof;
- (b) whether the Government is taking steps to remove the said restrictions and meet the  demands  of  account  holders  of  the  aforementioned  bank  including  a  bailout package;
- (c) if so, the details thereof and if not, the reasons therefor; and
- (d) the details of steps taken by the Government to ensure that such a crisis does not occur in other banks?

## Answer

THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ANURAG SINGH THAKUR)

(a)  to  (c)  The  Government  has  from  time  to  time  received  representations  about alleged  irregularities  in  Cooperative  Banks  which  were  forwarded  to  the  Reserve Bank of India (RBI), as the banking functions of Cooperative Banks are regulated by them.

In  this  regard,  RBI  has  also  informed  that  they  have  received  a  number  of complaints/representations  from  depositors  through  various  channels  like  e-mails, CPGRAM, post etc. and most of these pertain to the restrictions on withdrawal of money from their accounts with Punjab and Maharashtra Co-operative (PMC) Bank. RBI has taken following measures to address the demand of account holders:

- RBI,  in  exercise  of  the  powers  conferred  under  sub-Section  (1)  and  (2)  of Section 36AAA read with Section 56 of the Banking Regulation Act, 1949 superseded the Board of Directors of the bank on September 23, 2019 and appointed  an  Administrator  in  its  place  for  a  period  of  six  months.  An Advisory Committee comprising of three experienced professionals has also been appointed to assist the Administrator in discharge of his duties in terms of Section 36AAA(5)(a) read with Section 56 of the Banking Regulation Act, 1949.
- After reviewing the bank's liquidity position, its ability to pay its depositors and with a view to mitigating the hardship of the bank's depositors, RBI has been progressively enhancing the limit for withdrawals which is presently at

Rs.50,000  effective  from    November  5,  2019.  With  the  latest  relaxation, about 78% of the depositors of the bank will be able to withdraw their entire account  balance.  The  withdrawal  ceiling  is  being  monitored  vis-à-vis  the bank's evolving depositor and liquidity profile and further action as deemed fit may be taken in the best interest of depositors of the bank.

- The  depositors  can  also  make  withdrawals  on  hardship  grounds  (medical expenses  and  non-medical  expenses  like  educational  expenses  of  self  or children, marriage expenses of self, other relatives and for livelihood) for an amount upto Rs.1 lakh (with a sub-ceiling of Rs.50,000 for withdrawal on all non-medical grounds). The power to sanction such hardship withdrawals has been  delegated  to  the  Administrator  of  the  bank  for  speedier  resolution  of such cases.

(d)  RBI  has  informed  that  the  following  policy  initiatives  have  been  taken  for strengthening the Urban Cooperative Banks (UCB) sector:

- (i) All-inclusive Directions are imposed under section 35A read with section 56  of  the  BR  Act,  1949  in  public  interest  to  prevent  the  affairs  of  any banking  company  being  conducted  in  a  manner  detrimental  to  the interests of the depositors or in a manner prejudicial to the interests of the banking company
- (ii) These  Directions,  inter  alia,  restrict  payment  of  deposits  beyond  a threshold  limit  to  prevent  the  possibility  of  preferential  payment  of deposits and prevent reckless lending in the interregnum etc. The banks are  also  required  to  take  prior  approval  of  RBI  before  making  any payments/expenditures that have not been allowed under these Directions,  thus  protecting  the  pool  of  deposits  of  the  depositors  from wasteful expenditures.
- (iii) At the same time, the UCBs are advised to take measures for revival such as  recovery  of  NPAs,  augmentation  of  capital  or  merger  with  a  strong UCB. In case the revival measures do not work within a reasonable time, license of such bank is cancelled.
- (iv) Guidelines have been issued on constitution of Board of Management in UCBs  having  deposits  of  ₹100  crore  and  above  to  improve  corporate governance and professionalism in UCBs.
- (v) As per the guidelines on reporting of large credits by UCBs having asset size  of  ₹500  crore  and  above  to  Central  Repository  of  Information  on Large Credits (CRILC) - All large credits (₹ 5 crore and above) will be reported  by  UCBs  having  total  assets  of  ₹500  crore  and  above  to  RBI. Banks  will  also  recognise  early  stress  in  loan  accounts  by  classifying them  as  special  mention  accounts  so  that  necessary  corrective  and preventive action can be initiated on time. This will enable RBI to carry out off-site supervisions more effectively.
- (vi) Revised supervisory action framework for UCBs has also been issued for timely  improvement in  the  financial  position  of  weak  but  viable  UCBs and early resolution of non-viable UCBs.

******