Lok Sabha Question No. 189 (STARRED), answered on 2019-12-02
Subject: Punjab and Maharashtra Cooperative Bank
Ministry: FINANCE
Asked by: Gangasandra Siddappa Basavaraj, Rita Bahuguna Joshi

THE MINISTER OF FINANCE (SMT. NIRMALA SITHARAMAN)

- (a) to (d): A Statement is laid on the Table of the House.

## Government of India Ministry of Finance

## LOK SABHA STARRED QUESTION NO. * 189 ANSWERED ON 02.12.2019 /Agrahayana 11, 1941(Saka)

## Punjab and Maharashtra Cooperative Bank

## *189. SHRI G.S. BASAVARAJ: SHRIMATI RITA BAHUGUNA JOSHI:

Will the Minister of FINANCE be pleased to state:

- (a) whether the recent banking scam relating to the Punjab and Maharashtra Cooperative Bank  has  prompted  the  Government  to  revisit  the  deposit  insurance  segment  to  restore public trust in banking institutions and if so, the details thereof;
- (b) whether among the BRICS nations, India has the lowest deposit insurance cover to per capita income ratio, at 0.9 times at present and if so, the details thereof;
- (c)  whether  during  the  financial  year  2019,  the  Deposit  Insurance  and  Credit  Guarantee Corporation collected Rs. 12,043 crore as premium on deposit insurance cover and settled only Rs. 37 crore worth of claims, that too on account of a failed cooperative bank and if so, the details thereof; and
- (d) the other steps taken by the Government and Reserve Bank of India to give relief to the retail/common customers of the said bank?

## ANSWER

Statement referred in reply to parts (a) to (d) of Lok Sabha Starred Question No. *189 to be answered on 02.12.2019 regarding Punjab and Maharashtra Cooperative Bank by SHRI G.S. BASAVARAJ: SHRIMATI RITA BAHUGUNA JOSHI

(a)  to  (d)  The  Deposit  Insurance  &  Credit  Guarantee  Corporation  (DICGC),  a  wholly  owned subsidiary of the Reserve Bank of India (RBI), provides insurance for bank deposits upto the limit fixed by the Corporation, in terms of  provisions of DICGC Act, 1961. Section 16(1) of the said Act provides that the Corporation may, from time to time, having regard to its financial position and to the interest of the banking system of the country as a whole, raise, with the previous approval of the Central Government, the financial limit of the total amount payable to one depositor in respect of his deposit at all the branches of a bank taken together. Accordingly, the insurance limit in respect of total amount payable to one depositor in a Bank was enhanced by the Corporation from time to time i.e. from the original limit of ₹ 1,500 in 1961 to the current limit of ₹1.00 lakh effective from May 1, 1993.

Currently (as on March 31 , 2019) 92% of the deposit accounts in number and 28% of the deposit in value  are  covered  by  DICGC.  This  is  higher  than  the  guidance  of  International  Association  for Deposit Insurance (IADI) which recommends coverage of 80% in number of accounts and 20-30% in value terms.

The deposit insurance cover to per capita income in India stood at 0.8 as on March 31, 2019 is the lowest  when  compared  to  other  BRICS  Nations  excluding  South  Africa.  The  details  of  deposit insurance coverage of BRICS nations are given as under:

(As on December 2018)

|   Sr No | Country                                               | DI Cover (USD)   | Per Capita Income (USD)   | DI Cover/PCI   |
|---------|-------------------------------------------------------|------------------|---------------------------|----------------|
|       1 | Brazil                                                | 75,588           | 8,920                     | 8.5            |
|       2 | Russia                                                | 24,306           | 11,288                    | 2.2            |
|       3 | India (March 2019)                                    | 1,407            | 1,828                     | 0.8            |
|       4 | China                                                 | 72,690           | 9,770                     | 7.4            |
|       5 | South Africa (proposal to establish DIS* is underway) | -                | 6,374                     | -              |

* DIS- Deposit Insurance System.

Source: IADI, World Bank Database and Websites of Respective Deposit Insurance Agencies.

DICGC settles the claims of liquidated banks. The total premium collected by the DICGC during the year 2018-19 is Rs.12040 crore. The details of premium collected from banks are as under:

(₹ in Crore)

|   Particulars | Particulars                            | 2018-19   |
|---------------|----------------------------------------|-----------|
|             1 | Premium Received - Commercial Banks    | 11,190    |
|             2 | Premium Received - Co-operative Banks  | 850       |
|             3 | Total (Commercial +Co-operative Banks) | 12,040    |

The aggregate claims of ₹40 crore in respect of 15 co-operative banks were settled during 2018-19 including  ₹3.05  crore  (on  account  of  two  co-operative  banks)  under  expeditious  claims  settlement policy of the Corporation.

RBI has taken the following measures to protect the interest of the depositors of PMC Bank.:

· To enable the bank to improve its position by concentrating on recovery of NPAs /bad loans, RBI imposed All-inclusive Directions on the bank with effect from close of business on September 23, 2019 for a period of six months in terms of which bank is prohibited from making fresh advances. Withdrawals by depositors have been restricted to the notified amount to avoid a run on the bank. These Directions, inter alia, restricted payment of deposits beyond a threshold limit and increasing liabilities to prevent the possibility of preferential payment of deposits and prevent reckless lending in the  interregnum  etc.  The  bank  is  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  and  allowing  only  for  productive/useful purposes.

- The Reserve Bank of India, after reviewing the bank's liquidity position and its ability to pay its  depositors  and  with  a  view  to  mitigating  the  hardship  of  the  bank's  depositors  has  been progressively  enhancing  from  time  to  time  the  limit  for  such  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.
- Further, the depositors can also withdraw on hardship grounds (medical expenses and nonmedical  expenses  like  educational  expenses  of  self  or  children,  marriage  expenses  of  self,  other relatives  and  for  livelihood)  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.

Meanwhile, based on a complaint filed by the bank against its officials and borrowers associated with the fraud/financial irregularities in the bank and manipulation of its books of accounts, the Economic Offences Wing, Maharashtra Police has started its investigations into the matter. Forensic Auditors have been appointed to look into the related transactions.

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