PMC Bank: Finance Minister says Govt Will Amend Laws If it Help in Better Regulation
Facing flak from several quarters on the Punjab & Maharashtra Co-operative (PMC) Bank fraud case, finance minister Nirmala Sitharaman on Thursday says if amendments help in better regulation, the union government would go ahead with the required legislative procedure in cooperative sector. While assuring customers and depositors, the finance minister also mentioned that her ministry has nothing much to do with the issues of PMC Bank but she will speak with Reserve Bank of India (RBI) governor on the distress of depositors. 
 
"Finance Ministry may have nothing to do with it (PMC bank matter) directly because RBI is the regulator. But from my side, I have asked the secretaries of my ministry to work with ministries of rural development and urban development to study in detail as to what is happening (with PMC Bank)," the minister says in Mumbai.
 
Speaking to reporters at Bharatiya Janata Party (BJP)'s office in Mumbai, Ms Sitharaman said that she would meet the RBI governor Thursday evening and convey the issues and urgency displayed by the PMC Bank customers.
 
Earlier in the day, the Minister met distressed customers of PMC Bank in Mumbai, who were protesting outside the BJP office. 
 
 
Ms Sitharaman further said that she has asked secretaries of the concerned Ministry to study in detail the shortcomings and if necessary look at ways in which the respective acts have to be amended. 
 
She said that in the meeting to be held to decide on amendments in Act for better regulation, along with representatives from the finance ministry a deputy governor level officer of the RBI would also be present.
 
The finance minister says she has explained to the (PMC Bank) customers that the RBI is taking action, doing what should be done as per the law. In such instances where there is malpractice and boards get bypassed, the central bank handles the matter, she added.
 
During the conversation with the PMC Bank depositors, the finance minister also informed them that the finance ministry is working with rural development ministry.
 
The PMC Bank fraud came to light in late September, when the RBI barred the bank from carrying out the majority of its routine business transactions for a period of six months, sparking panic among the depositors and sending shock-waves in the city banking and business circles.
 
 
On Wednesday, customers of PMC Bank protested outside a Mumbai court.
 
Carrying placards that read "No Bail, Only Jail", they accused the RBI of not taking strict action against the erring officials and appealed to Prime Minister Narendra Modi to intervene in the matter, says a report from NDTV.
 
Days after fraud came to light, the now-suspended managing director of the bank Joy Thomas, in a letter to the RBI acknowledged the wrongdoing, and said the bank even opened a number of dummy accounts to replace the stressed accounts held by Wadhawans-led Housing Development and Infrastructure Ltd (HDIL).
 
The economic offences wing (EOW) of Mumbai Police and the enforcement directorate (ED) are investigating the matter and have made few arrests and attached properties and assets so far.
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    COMMENTS

    manojkamrarti

    1 week ago

    More than decades long very important legislative amendment of stopping dual control of UCBs by RBI and state govt in BR Act-1949 is still pending despite recommendation in numerous reports on urban cooperative banks after failure of MMCB (ketan parekh scam).

    Let us hope in this winter session , amendment in BR Act.

    Ranbir Lamba

    1 month ago

    Note my post of yesterday where FM said can't do anything. I had Recommended ammend the law & make it punative She has responded quickly & will set right for further safety of customers

    Umadevi

    1 month ago

    The root cause is the political influx to the board of many banks....and they will sanction loans to fraud entities. Cooperative banks in Kerala are forced to issue loans to State Road Transport Corp. and Electricity Board etc. which cannot be recovered as these enterprises are already loss making.

    REPLY

    manojkamrarti

    In Reply to Umadevi 1 week ago

    The only solution is complete control of RBI on banking activity of urban cooperative banks to stop loot, plundering by distributing unsecured loans.

    lalit

    1 month ago

    Why only PMC, let the finance minister ask RBI on the status of all other cooperative banks to take preventative action right now so that such scams come out right now.
    Also RBI Governor and auditors should be held accountable for the collapse of PMC Bank since they are the one who monitor and do the audit of such banks.

    Dharam Vir Narang

    1 month ago

    When properties and assets of HDIL have been attached why normal banking has not still been restored for PMC customers. In case of other banks 2.75 lakh crs. have been written off so why different rules for banks operating in one Bharat (India).

    REPLY

    Girija Santhanam

    In Reply to Dharam Vir Narang 1 month ago

    If Money Life believes in responsible journalism, let them work out a framework by which such scams can be avoided in the future. Let Money Life can ask a few experts to recommend to Nirmala - what needs to be done. Instead of waiting for one more scam, can't the Finance Minister investigate the working of other co-operative banks? Why can't we have separate regulators only for co-operative banks? When we know that RBI doesn't have the capacity or wherewithal to carry out multiple audits, why not attack the root cause of the problem? Vigilance is no longer an option - it is the need of the hour.

    Sucheta Dalal

    In Reply to Girija Santhanam 1 month ago

    Ms Santhanam -- since you keep sending us a string of google-researched articles, we would have expected that you at least make the effort to understand what is journalism and media.
    First, we are not regulators. We cannot prevent scams. Do you even realise how silly you sound? You say you know RBI has not wherewithal to carry out multiple audits -- really? Then it should give up the job of being banking regulator.
    But you think Moneylife - a publication - has the wherewithal to get to the "root of the problem" --and then what? Do we have the power to implement?
    Also, since you have had articles published in Moneylife -- make an effort to visit Moneylife Foundation's website and understand it is a separate entity engaged in financial literacy. That must homework on your part is surely not too much to ask?

    RBI rejects India Bulls-Lakshmi Vilas Bank amalgamation
    The Reserve Bank of India on Wednesday rejected the merger of Lakshmi Vilas Bank and India Bulls Housing Finance Ltd, months after the bank had sought its approval on May 7.
     
    "The RBI vide their letter dated October 9, 2019, informed that the application for voluntary amalgamation of Indiabulls Housing Finance Ltd and Indiabulls Commercial Credit Ltd with the Lakshmi Vilas Bank (LVB) cannot be approved," Lakshmi Vilas Bank said in a statement.
     
    The crucial merger was for Indianbulls was to diversify its asset while for Lakshmi Vilas Bank, running in loss for five successive quarters, it was to raise capital to come out of the lending curbs.
     
    The board of directors of the bank on April 5 had approved a scheme of amalgamation with Indiabulls Housing Finance.
     
    The RBI's rejection of amalgamation comes shortly after it had initiated Prompt Corrective Action (PCA) against the Lakshmi Vilas Bank, owing to high non-performing assets (NPA) and others.
     
    On Sep 28, the bank announced: "The RBI has initiated PCA on account of high net NPA, insufficient capital to risk assets weighted ratio (CRAR, also known as capital adequacy ratio CAR) and common equity tier-1, negative return on assets for two consecutive years and high leverage."
     
    The PCA comes after the RBI carried out an on-site inspection of the Bank on March 31 under Risk Based Supervision.
     
    According to the bank, the Reserve Bank has advised the RBI on the restrictions imposed and the actions to be taken.
     
    The Lakshmi Vilas Bank said it will report the monthly progress on the RBI directions.
     
    "The PCA is aimed at improving the bank's performance and will not have any adverse impact on its normal day-today operations, including acceptance/repayment of deposits in the normal course," the bank said.
     
    Meanwhile the credit rating agency, Brickwork Ratings India Pvt Ltd has revised the rating from "BWR BBB -" (Credit Watch with Developing Implications) to "BWR BB+" (Credit Watch with Developing lmplications) for the bank's unsecured redeemable non-convertible subordinated lower tier II bonds - Series VII (Option B), of Rs.50.50 crore.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    Girija Santhanam

    1 month ago

    This is a good move by RBI. Needs to be appreciated. It is better that LVB is liquidated.

    SBI cuts interest rates on savings deposits to 3.25%
    The State Bank of India (SBI) on Wednesday cut interest rate on savings deposits, with a balance of upto Rs 1 lakh, by 25 bps to 3.25 per cent from November 1, and slashed retail & bulk term deposit interest rates by 10 and 30 bps respectively for 1 year to less than 2-year tenor from October 10.
     
    "In view of the adequate liquidity in the system, the State Bank of India announces revision in interest rate on Savings Bank Deposits (with a balance upto Rs 1 lakh) from 3.50 per cent to 3.25 per cent w.e.f. 1st November 2019. Bank also slashes its Retail TD and Bulk TD interest rates by 10 bps and 30 bps respectively for 1 year to less than 2 years' tenor w.e.f. 10th October, 2019," the SBI said in a statement. 
     
    SBI shares were trading at Rs 254.95, up Rs 5.85 (2.35%) recovering more than 4 per cent from lows. 
     
    Earlier, the bank lowered its Marginal Cost of Funds based Lending Rate or MCLR by 10 basis points across all tenors to 8.05 per cent from October 10, a move that is likely to make home and other retail loans cheaper for the existing borrowers. 
     
    This is the sixth cut in MCLR in FY 2019-20 and it comes days after the Reserve Bank of India (RBI) lowered the repo rate by 25 basis points. 
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    Girija Santhanam

    1 month ago

    I hear that the FD rates will be slashed to 5% next year because SBI is unable to handle the huge number of deposits and want people to invest in their mutual funds business.
    In the future, one can expect that interest rates on savings bank balances will be made 0. You won't earn any interest on SB account balances. The interest on FDs will be reduced. Scamsters and fraudsters will enjoy the fruits of someone else's labor. The media will earn their money by sensationalizing the issue. The Government will form one more committee which will eat into the exchequer's funds and make recommendations that will certainly not lead to reduction in the scams.
    What do all these indicate?
    The Govt & RBI are not doing anything to protect the consumer.
    Tax the middle class more and more; let the so-called entrepreneurs enjoy more and more credit; let bankers make money by taking bribe and giving loans; Money Life and the team will be forever busy reporting such incidents. But will something change at the ground level? Nay.

    GLN Prasad

    1 month ago

    How pathetic? During the past, savings were treated as a virtue and spending as a crime. The Government can utilize savings from the public in welfare activities and can pay higher interest to encourage savings. Senior citizens can never take a risk in keeping life long savings, kept in reserve for medical emergencies in SB account gets a lower rate of interest, and in some cases, if they are greedy, there may RBI restrictions limiting the amount of withdrawal also. The government should consider ways to encourage savings as the welfare of the public and economy is not the only way for prosperity.

    Ramesh Poapt

    1 month ago

    sorry for diversion. but ML, to the best of my knowledge
    ,did not give details of small saving schemes from 1st oct.19
    though it remained unchanged.
    it is great relief for senior citizens and should be appreciated.

    Newme

    1 month ago

    In read somewhere that interest rates were 20% on fixed deposits in 1980s. Will it reach negative rate like in Japan, Germany in another 30 years?

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