The PMC Bank episode has indeed brought a kind of storm for the urban cooperative banking sector as even RBI is thinking in terms of reviewing the current regulations applying to these banks.
Informed sources say RBI may seek to acquire power which would enable it to force merger of urban cooperative banks, a statutory control it has been demanding for many years. Till date RBI cannot force merger of UCBs and it only signs on voluntary merger of UCBs on merits of the case.
RBI is talking to the govt to amend the co-op act which would empower it to force compulsory merger of UCBs, as is the case with private and PSU banks. There are many instances in the past when RBI forced the merger of private banks. It aims to have the same power for UCBs, say sources.
While unveiling the monetary policy last week RBI governor Shaktikanta Das hinted at this and said RBI is talking to the government on the issue. It bears recall that RBI was roundly condemned for being not able to find out the scam going on for many years in the case of PMC Bank.
RBI governor Shaktikanta Das said one incident at a cooperative bank does not deny the entire financial system a clean bill of health. “The RBI will review all the regulations of cooperative banks and will discuss with the government if required”, he is quoted saying by PTI.
He, however patted himself on the back and said RBI was swift in handling the situation arising out of PMC Bank collapse. He was hinting at gradual increases in the withdrawal limit for the depositors. The central bank has finally revised the withdrawal limit to Rs 25,000- a decision that has been welcomed by account holders.
The scam that broke in PMC bank spread across Maharashtra and Punjab has dealt a serious blow to the country’s banking system. According to initial estimates, the scam involves Rs 7000 crore.
The bank has 137 branches and 51 thousand members. The amount deposited by 51 thousand people counts Rs 11, 617 crore. PMC is the fifth largest urban cooperative bank in the country.
It came to light that the bank had given a whopping 73 percent of loans to Housing Development and Infrastructure Ltd. The four scamsters have been arrested in connection with the scam so far.