Fraud-hit Punjab and Maharashtra Co-operative Bank today invited proposals for equity investments from suitors to aid the bank’s reconstruction.

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In a public notice, the bank said any party that takes over the bank could consider converting the beleaguered entity into a small finance bank, subject to RBI's approval.

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“Subsequent to commencement of the normal day-to-day operations, it will be open for the investor(s) to convert the bank into a Small Finance Bank by making an application to Reserve Bank of India subject to compliance of the RBI guidelines,” it said.

Eligible suitors have been asked to submit Expressions of Interest latest by December 15. All financial institutions, including banks, NBFCs, microfinance institutions and others, are free to apply.

The bank will forward viable proposals to RBI for its consideration for preparing a draft scheme of reconstruction and other consequential action under Section 45 of Banking Regulation Act, 1945, it said.

The bank said that investor(s) should ideally bring in the capital required for enabling the bank to achieve the minimum required capital to risk-weighted assets ratio (CRAR) of 9 percent. It added that the investors may explore the option of restructuring a part of deposit liabilities into capital/capital instruments.

The bank may also approach DICGC for its support for payment up to Rs 5 lakh to depositors, it added.

Mumbai-based PMC Bank’s board was superseded by RBI in September of last year after major financial irregularities and fraud by the financial institutions board members came to light.

However, no resolution has been found so far. “While the Administrator of PMC Bank and the RBI have been exploring various options for resolution of the bank, several factors such as huge losses incurred by the bank resulting in its entire net worth getting wiped out, steep erosion in deposits, etc. continue to pose serious challenges in finding a workable plan for revival of the bank,” the RBI had said in a statement on September 23.

RBI also recently appointed a new administrator for PMC Bank - AK Dixit, a former Union Bank of India executive - after the first administrator, JB Bhoria, stepped down from his position in September citing health reasons.

In a letter to the depositors of PMC Bank dated November 3, 2020, Dixit said that the bank has already initiated actions for recovery of bad debts, including accounts of HDIL Group, accused of siphoning funds from the bank.

“We have intensified our recovery efforts through close follow up, settlements and legal action as appropriate. We have taken aggressive steps to control costs and cut expenses. Branch network is being rationalised, premises are being surrendered and rents are being re-negotiated down,” he said.

Detailing other measures taken, Dixit said that “a hard look is being taken at every expense”.

“We are working on finding a way out to resolve the Bank in the best interests of all stakeholders, particularly the depositors. Various models/ options are being considered, and discussions are continuing with different entities in this regard. In spite of the pandemic-induced hurdles, the matter is engaging our close attention under the guidance of RBI,” the letter read.

PMC Bank had total deposits of Rs 10,727.12 crore, total advances of Rs 4,472.78 crore and gross NPA of Rs 3,518.89 crore as on March 31, 2020. The share capital of the bank is Rs 292.94 crore.

The bank registered a net loss of Rs 6,835 crore during 2019-20 and has a negative net worth of Rs 5,850.61 crore.

(Edited by : Nazim)

First Published:Nov 3, 2020 4:19 PM IST