Maharashtra Government Suggests Merger Of PMC Bank With MSC Bank

The state government will speak to the Reserve Bank of India on the issue of merger: State Minister Jayant Patil.
A closed PMC Bank ATM at Nahur West (Source: BloombergQuint)
A closed PMC Bank ATM at Nahur West (Source: BloombergQuint)

The Maharashtra government has suggested a merger of Punjab & Maharashtra Cooperative Bank with the Maharashtra State Cooperative Bank in a bid a provide relief to depositors of the troubled lender, state minister Jayant Patil said on Thursday.

If needed, the state government will speak to the Reserve Bank of India on the issue of merger of the MSC and PMC banks, he said.

"I spoke to the MSC Bank chairman day before yesterday. We have suggested to MSC Bank that they should try to merge PMC Bank with it so that the poorest of its depositors get relief," Patil told reporters.

PMC Bank has been put under restrictions by the RBI, after an alleged Rs 4,355-crore scam came to the light following which the deposit withdrawal was initially capped at Rs 1,000, causing panic and distress among depositors. The withdrawal limit has been raised in staggered manner to Rs 50,000.

At least eight depositors, who had high quantum of money stuck with the bank, died in the last couple of months, including one who committed suicide. "We want to assure PMC Bank depositors that the government stands with them. The merger of the two banks will definitely help small depositors," the minister said.

Patil, who has earlier been finance minister of the state, said that MSC Bank's health is good and there should be no problem in case PMC Bank is merged with it.

The Maharashtra NCP chief also said that the process may take around one-and-a-half months to complete. PMC Bank, which has around 16 lakh depositors, was placed under an RBI administrator on Sept. 23 for six months due to massive under-reporting of dud loans.

The bank, over a long period of time, had given more than Rs 6,700 crore in loans to the Housing Development and Infrastructure Ltd., which is 73 percent of its total advances, and which turned sour.

Its total loans stand at around Rs 9,000 crore and the deposits at over Rs 11,610 crore. There have been massive protests across city from the PMC Bank depositors following the RBI action.

Twelve people, including top officials of the PMC Bank and HDIL, have so far been arrested by Mumbai Police's Economic Offences Wing in connection with the scam.

The EOW suspects a nexus between some of the accused and HDIL, whose mammoth loan defaults are said to have caused a liquidity crisis at the bank, leading to appointment of administrator by RBI and restrictions on withdrawal of funds.

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