Yet another cooperative bank has come under the RBI radar. Restrictions on Punjab Maharashtra Co-operative bank by the Reserve Bank of India have sent its customers into a tailspin because regular banking transactions have been suspended since last Monday.
Imagine you have a Savings account and all your Fixed Deposits are with the PMC Bank. Now you have been told that for the next six months, you can only draw a total of Rs. 1,000. This means those who have significant deposits in the PMC Bank will not be able to use their own money.
Why did RBI take such a step?
Under Section 35A, this clampdown is due to irregularities observed by RBI in regards to its banking operations.
According to data from the National Bank for Agricultural and Rural Development (NABARD), there were 33 state cooperative banks and 363 district central cooperative banks in Maharashtra as of March 31, 2018.
What is the way forward for customers to get their money back?
1) They should wait for the merger of the Bank with another financial entity which is stable enough to absorb the losses of PMC
2) They can apply to RBI for relief, based upon urgent needs like hospitalization etc
The deposit insurance scheme guarantees just Rs 1 lakh to the depositor in the event of a bank collapse.
What roles do these Banks play?
They are important for offering banking services to the low-income groups, mainly farmers, small-scale businesses etc. In short, for any person who needs a loan.
The role of political parties in the collapse of such institutions must be probed. Why did the RBI not give any warning before taking such a drastic step?
These are the questions to which should demand answers from the State.