The Reserve Bank of India said any generalisation for release of funds to meet ‘financial needs’ of scam-hit Punjab and Maharashtra Co-operative (PMC) Bank’s depositors may not be appropriate and sustainable, owing to the bank’s precarious financial position.

The central bank made the aforementioned observation in its affidavit filed in the Delhi High Court in reply to consumer rights activist Bejon Kumar Misra’s petition.

Also read: Distraught depositors want PMC Bank revived soon

Through the petition, Misra is seeking immediate release of emergency funds to meet financial needs arising out of out-break of second wave of Covid-19 and to declare extension of directions issued to PMC Bank under the Banking Regulation Act 1949 as ultra vires.

In its reply, the central bank said there is no merit in the relief sought by the petitioner for immediate release of emergency funds to meet the financial needs arising out of sudden out-break of second wave of Covid-19, as depositors are already allowed to withdraw up to ₹5 lakh on hardship grounds for treatment of terminal illnesses, including treatment of Covid-19.

The RBI further submitted that to make the process of withdrawal on hardship grounds easier and to avoid delays in sending such recommendation to RBI for approval, the authority for approving the payment under hardship grounds has been delegated to the PMC Bank.

“ is the duty of PMC Bank to pay hardship amount to the eligible depositors as per directions of RBI and subject to availability of liquidity with PMC Bank,” RBI said.

Takeover/ merger

The RBI submitted that the financial condition of PMC Bank continues to be precarious, with its liquidity position not improving enough to allow much room for enhancement of withdrawal limit.

Further, the bank also needs to maintain bare minimum liquidity to run as a going concern and to make itself viable for prospective investors for takeover/ merger etc. Then the reconstruction of the bank will be feasible, which will be in the interest of larger body of depositors, the central bank said.

Due to precarious financial condition of PMC Bank and on account of significant deposit erosion, serious financial irregularities and mismanagement of affairs of the bank and to protect the interest of the depositors in general and in public interest, RBI had placed PMC Bank under directions vide directive dated September 23, 2019, the affidavit said.

Withdrawal limit

The directions are presently valid up to June 30. The withdrawal limit per depositor is capped at ₹1 lakh.

“It is submitted that all efforts are underway to expedite consultations with the prospective investors who have submitted their final offer, in order to arrive at best possible resolution in the interest of all depositors and other stakeholders of the bank,” the central bank said.

The Centrum Group-BharatPe combine is believed to be the font-runner to takeover PMC Bank.