Scam-hit Punjab and Maharashtra Co-operative (PMC) Bank is looking for a knight in shining armour. The bank has invited Expression of Interest (EoI) from interested investors to take up equity interest in the bank for its reconstruction.

Eligible investors could be financial institutions, including banks and non-banking finance companies/ microfinance institutions; and individuals or group of individuals/ companies, societies, trusts or any other such entities having adequate networth.

The objective of the process of invitation of EoI is to identify a suitable equity investor/ group of investors willing to take over management control so as to revive the bank and commence regular day-to-day operations.

The EOI said shortlisted investors may conduct due diligence on the bank and subsequently submit their binding offers on or before December 15.

Subsequent to commencement of the normal day-to-day operations, it will be open for the investor(s) to convert the bank into a Small Finance Bank (SFB) by making an application to the Reserve Bank of India (RBI), subject to compliance with its guidelines on Voluntary Transition of Primary (Urban) Co-operative Banks (UCBs) into SFBs, according to the EOI.

The bank’s Administrator, AK Dixit, in a letter to customers, said: “We are working on finding a way out to resolve the bank in the best interests of all stakeholders, particularly the depositors.

“Various models/ options are being considered, and discussions are continuing with different entities in this regard.”

Directions and harried depositors

The Mumbai-headquartered multi-state urban co-operative bank was placed under Directions by the Reserve Bank of India (RBI) from the close of business on September 23, 2019.

The RBI took this action as PMC Bank’s financial position deteriorated substantially due to fraud/ financial irregularities, allegedly perpetrated by a real estate group and certain bank officials, and manipulation of its books of accounts.

RBI’s Directions, inter alia, cap deposit withdrawal (presently ₹1 lakh per depositor for the entire 15-month period of Direction up to December 22) and lending.

The deposit withdrawal cap has caused untold misery to depositors, especially senior citizens, amid the on-going pandemic.

About 80 PMC Bank depositors lost their lives since the Directions were imposed on the lender.

In the last one year or so, depositors have moved heaven and earth – took to the streets amid the raging pandemic, met regulatory officials and politicians of every hue, among others – to draw attention to their plight, but to no avail.

Chander Purswani, President, PMC Depositors Forum, said the authorities need to give an assurance to the troubled depositors that their money is safe and that they will get access to the entire amount deposited in the bank sooner rather than later.

Impaired financial position

As per the EOI, PMC Bank registered a net loss of ₹6,835 crore during 2019-20 and has a negative net worth of ₹5,850.61 crore.

The EOI emphasised that investor(s) should ideally bring in the capital required for enabling the bank to achieve the minimum required capital to risk weighted assets ratio (CRAR) of 9 per cent.

However, the investors may explore the option of restructuring a part of deposit liabilities into capital/capital instruments, it added.

The bank may also approach the Deposit Insurance and Credit Guarantee Corporation (DICGC) for its support for payment up to ₹5 lakh (insured deposits) to depositors

As of March-end 2020, PMC Bank had total deposits of ₹10,727.12 crore (₹11,617.34 crore as of March-end 2019, according to the bank’s FY19 Annual Report) and total advances of ₹4,472.78 crore (₹8,383.33 crore).

As of March-end 2020, gross non-performing assets (GNPAs) of the bank stood at ₹3,518.89 crore (₹315.24 crore).

As of March-end 2020, the share capital of the bank was ₹292.94 crore (₹292.61 crore as of March-end 2019).

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