PMC 24th co-op bank to face RBI action since January

The co-operative banks that have seen an extension of orders issued by RBI include Kapol Co-operative Bank, Rupee Co-operative Bank, Mercantile Co-operative Bank and The City Co-operative Bank among others.

Outside a PMC Bank branch in Kopar Khairane in Navi Mumbai. (Express photo by Narendra Vaskar)

The Reserve Bank of India’s order restricting banking activity at Punjab and Maharashtra Cooperative (PMC) Bank on Tuesday is not a case in isolation as 23 more co-operative banks faced similar action by the regulator so far in this calendar year.

While RBI restricted withdrawals and appointed an administrator superseding the board of PMC on Tuesday after finding financial irregularities and audit concerns at PMC Bank, under Section 35(A) of the Banking Regulation Act, it has taken steps under the same section in case of 23 more urban co-operative banks and has extended the period of such action (taken in the past), in case of ten other banks.

Sources in the banking industry say that this reflects upon the magnitude of the problem at co-operative banks and raises question marks in the way they are being run and regulated. As per the data collated by Maharashtra State Bank Employees Federation (MSBEF), PMC Bank is the 24th bank this year to have seen RBI invoking Section 35(A). The section provides RBI with the power to give directions to banks in a bid to “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”. The RBI can also “secure the proper management of any banking company” under this section.

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The co-operative banks that have seen an extension of orders issued by RBI include Kapol Co-operative Bank, Rupee Co-operative Bank, Mercantile Co-operative Bank and The City Co-operative Bank among others.

Beside the PMC Bank, the co-operative banks that have seen fresh directions from RBI under this section this calendar include Mapusa Urban Co-operative Bank of Goa, Kerala Mercantile Co-operative Bank, The Maratha Sahakari Bank, The CKP Co-operative Bank and Bidar Mahila Urban Co-operative Bank among others. Devidas Tuljapurkar, general secretary, MBSEF said that instead of intervening as knee-jerk reaction, the RBI should, “Carry out inspection of all Urban Co-operative Banks,” and do quality inspection to deal with delinquent urban co-operative banks. He further said, “RBI as a regulator has failed in arresting distractions in the financial sector, leading to decline in confidence of common man in the banking sector”.

On the other hand, three banks have seen a withdrawal of orders passed by RBI under the section this year. These include Shri Ganesh Sahakari Bank, Gomti Nagariya Sahkari Bank and Indian Mercantile Co-operative Bank.