RBI ups withdrawal limit for PMC Bank customers

New Delhi: Bringing some relief to panic-stricken customers of Punjab & Maharashtra Cooperative (PMC) Bank, the Reserve Bank of India (RBI) upped the cash withdrawal limit to Rs 10,000 per account on Thursday. The move will impact over 60 percent customers of the crippled lender.

"It has been decided to allow depositors to withdraw a sum not exceeding Rs 10,000 (including the Rs 1,000 already withdrawn) of the total balance held in every savings bank account or current account or any other deposit account," RBI said in a statement.

This may not work if you have any liability with PMC Bank

The Central bank said that the higher withdrawal limit is subject to the fact that the customer does not have any liability with PMC Bank by way of loans of surety for a third-party loan. This increase in the limit will allow 60 percent of the depositors of the bank to withdraw their entire account balance. The RBI said that the relaxation has been granted to reduce the hardship being faced by the bank's customers.

CMD says we have enough liquidity

PMC Bank's suspended managing director Joy Thomas said that the lender holds enough liquidity to meet all liabilities, and every penny of the public is secure. "We have enough liquidity and back-up securities for all what we have lent. As a cooperative bank, we never do unsecured lending and our loan coverage ratio has always been 100-110 per cent," he said.

The backdrop

Earlier this week, the bank imposed a slew of restrictions on PMC Bank for a period of six months, allowing withdrawals of only Rs 1,000 from the bank's depositors. The move left the customers in the lurch and panic-stricken about the fate of their deposits and savings.

The restrictions were imposed after the Central bank found certain irregularities in the bank, including under-reporting of NPAs and had put restriction on fresh lending.

Why did RBI placed curbs on PMC Bank?

The RBI is responsible for monitoring banks' financial health and issuing directions in case of concerns over the financial health of a banking institution. However, the Central bank has so far stated no reasons for placing restriction on PMC Bank.

On the face of it, PMC Bank is a profitable bank with a low NPA ratio. However, the imposition of curbs does hint at the possibility of the discovery of irregularities in its books. The shock move by the RBI has left the bank's customers in a state of panic as uncertainty clouds the fate of their savings and deposits.