The Reserve Bank of India’s curbs on Punjab and Maharashtra Cooperative Bank (PMCB) come as a rude shock to the thousands of depositors across the State, but it also comes as a blessing in disguise for the two cooperative banks in Goa which were on the threshold of a merger with the Mumbai-based bank.
The Mapusa Urban Cooperative Bank and the Madgaum Urban Cooperative Bank, both of which are in the red, were in the final stages of striking a deal with PMCB in the hope of tiding tide over their respective financial crises. And this development has come like a bolt from the blue because even local representatives of the RBI were engaged in the negotiation processes. Both cooperative banks should consider themselves lucky since talks were in an advanced stage and a decision on the merger was on the horizon. RBI strictures post the merger would have only spelt further doom for these cooperative banks which are currently on shaky ground. While the focus of mergers has now shifted to Thane Janata Sahakari Bank (TJSB), the PMCB freeze come as an eye-opener. Both the troubled banks in Goa will have to tread an extremely cautious path to ensure that they don’t land up in further complications.
The RBI curbs on PMC bank will throw the lives of thousands of people out of gear. The bank has been restrained from doing majority of its routine business for six months and depositor withdrawals are capped at a total of Rs 1,000 for six months. Picture the agony which a lady went through in Margao when she learnt that all that she could withdraw was Rs 1,000 ahead of her daughter’s wedding. Imagine the situation of another customer who came to withdraw money to treat his ailing mother. These and many more are stories of distress and pain that have been inflicted on the common man for no fault of theirs.
Majority of any cooperative bank customers are the small and medium businessmen, the self-employed, traders and the common man. Such a freeze would mean that businesses would take a hit. That’s not all. Depositors who have obligations like scheduled credit card payments, monthly payouts including dividends and EMI deductions through PMC Bank will have to register for a fresh mandate with a different bank or face the consequences of default.
The freeze means that the regulator is not satisfied with the bank’s functioning and has taken this extreme step to safeguard the interest of borrowers. No matter how harsh it may seem, it is the RBI’s responsibility to do a health scan on banks to ensure that the monies of depositors are in safe hands. In the case of PMC, it appears that inherent mechanisms failed to trap irregularities and poor regulatory accountability has surfaced.
The PMC Bank’s Managing Director Joy Thomas may have given all the possible assurances to its customers on rectification and a bounce-back, but people’s trust in cooperative banks has hit a new low.
