Reserve Bank of India today extended regulatory restrictions placed on Punjab and Maharashtra Cooperative (PMC) Bank by another six months.

Simultaneously, it has also now hiked the withdrawal limit for the co-operative bank’s depositors to Rs 1 lakh.

PMC Bank’s activities were curbed in September last year after the RBI found financial irregularities, and misreporting of loans given to real estate developer HDIL.

The curbs were placed under Section 35A and Section 56 of the Banking Regulation Act , which allow the banking regulator to impose restrictions on business activities banks, including cooperative lenders, to protect the interest of depositors.

This is the second such extension by RBI, after no resolution was found for the crisis-hit bank.

“It is hereby notified for the information of the public that the validity of the aforesaid Directive dated September 23, 2019, as modified from time to time, has been extended for a further period of six months from June 23, 2020 to December 22, 2020 subject to review” the RBI said in its release.

The regulator said it has been engaging with the stakeholders to explore the possibility of a resolution of the bank, but admitted to facing challenges on this front.

“The process has been affected due to the lockdown on account of COVID 19 and the continuing uncertainty around the pandemic. Further, the extent of the negative net worth of the bank, and the legal processes involved in the recovery of bad debts also pose challenges/limitations in the resolution of the bank,” RBI said.

While the RBI continues consultations with various stakeholders to find a solution, it has decided to extend the directions for another six months till the end of the year.

The regulator has also gradually been increasing the withdrawal limit for the bank’s depositors, starting from Rs 10,000 per borrower to now Rs 1 lakh.

“With the above relaxation, more than 84% of the depositors of the bank will be able to withdraw their entire account balance.” RBI stated.

On May 29, the Delhi High Court had directed the bank and RBI to consider the needs of depositors during the COVID-19 induced lockdown, and ease the withdrawal limit.

The economic offence wing of Mumbai Police, and the Enforcement Directorate are currently looking into the fraud at the bank, and have registered offences against the bank’s officials as well as promoters of HDIL.

First Published:Jun 19, 2020 5:46 PM IST