NEW DELHI: Crisis-ridden Punjab and Maharashtra Co-operative (PMC) Bank has invited proposals for equity investments from potential suitors for the reconstruction of the bank. In an expression of interest (EoI) released on its website on Tuesday, the lender said that eligible investors could consider converting the beleaguered entity into a small finance bank.
"Objective of the process of an invitation of EoI is to identify a suitable equity investor/ group of investors willing to take over management control so as to revive the bank and commence regular day-to-day operations," it said in its EoI, adding that "subsequent to commencement of 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 on Voluntary Transition of Primary (Urban) Co-operative Banks (UCBs) into Small Finance Banks (SFBs)."
Eligible suitors have been asked to submit the EoI latest by December 15. All financial institutions, including banks, NBFCs, microfinance institutions and others, are free to apply.
Investors should ideally bring in capital required for enabling the bank to achieve the minimum required capital to risk-weighted assets ratio (CRAR) of 9%. Later, however, they may explore the option of restructuring a part of deposit liabilities into capital/capital instrument, it added. The bank may also approach DICGC for its support for payment up to Rs 5 lakh to depositors.
The Reserve Bank of India (RBI) superseded the PMC Bank board in September 2019 and capped withdrawals after investigative agencies detected a fraud in the bank.
During investigations, it was found that about 70 per cent of its total loan book of Rs 8,383 crore as on March 31, 2019, had been taken by real-estate firm HDIL. The police arrested Joy Thomas, former managing director of the PMC Bank, in October. The investigators have since made a few more arrests.
This case has even prompted the government to pass the Banking Regulation (Amendment) Bill in Lok Sabha to bring cooperative banks under the purview of RBI. However, there has been no respite for its thousands of depositors who have not been unable to access their deposits since the last one year.
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.
In a separate letter to the depositors of PMC Bank, the newly appointed administrator for PMC Bank AK Dixit detailed the measures undertaken so far to revive the bank. He said that the bank has already initiated actions for recovery of bad debts, including accounts of HDIL Group.
"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. Staff expenses have also been substantially reduced. In short, a hard look is being taken at every expense,” added Dixit.
Earlier in August, the banking regulator had told the Delhi High Court that it was impossible to raise the current withdrawal limit beyond Rs 1 lakh imposed on the bank, citing lack of liquidity as against a total deposit liability of Rs 10,000 crore. Liquid assets available with PMC bank were to the tune of Rs 2,955.73 crore which is “grossly insufficient” to fully pay all its depositors, it added.