PMC Bank customers not to get Rs 5 lakh deposit cover in first lot

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With multi-state co-operative bank in the midst of a resolution procedure, customers of the stressed Punjab & Maharashtra Co-Operative Bank (PMC Bank) would not receive up to Rs 5 lakh in insurance coverage in the first batch.

Except for PMC Bank, the Deposit Insurance and Credit Guarantee Corporation (DICGC) would reimburse customers of 20 stressed banks in the first batch. The statutory 90-day period for the first lot ends on November 30.

The RBI had given in-principle approval to a consortium led by Centrum Financial Services and fintech firm BharatPe to buy the impaired PMC Bank in June.

The RBI granted the consortium a small finance bank licence earlier this month, clearing the way for the takeover.

The DICGC recently stated that the provisions of Section 18 A (7) (a) of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021, may be necessary. If a stressed bank is in the process of being resolved, the term for payout of Rs 5 lakh might be extended by another 90 days under Section 18 A (7) (a) of the Act.

“In the interest of finalising a scheme of amalgamation of the insured bank with another banking institution, or a scheme of compromise, arrangement, or reconstruction in respect of such insured bank, the Reserve Bank finds it expedient, and communicates to the Corporation accordingly, the date on which the Corporation shall become liable to pay every depositor of such insured bank.”

After discovering significant financial irregularities, disguising and misreporting of loans provided to real estate developer HDIL, the RBI superseded the board of PMC Bank and placed it under several regulatory restrictions in September 2019.

The Reserve Bank of India (RBI) had imposed restrictions on deposit withdrawals from these insolvent financial institutions. Maharashtra has ten banks, Karnataka has five, while Uttar Pradesh, Kerala, Rajasthan, Madhya Pradesh, and Punjab each have one.