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<ul><li>Nirmala Sitharaman increased the guarantee that the government offers depositors as banks fail – from ₹1 lakh to ₹5 lakh. </li><li>This is the first time in 59 years that the government moved to increase <keyword id="1127487" type="ORGANIZATION" weightage="20" keywordseo="Deposit-Insurance">deposit insurance</keyword>, after 1961. </li><li>The Deposit Insurance and Credit Guarantee Corporation received<a href="https://www.businessinsider.in/business/news/deposit-insurance-corporation-sees-rs-14100-cr-claims-amid-pmc-crisis/articleshow/73016977.cms"> total claims of</a> ₹14,100 crore. </li></ul>After <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/the-collapse-of-pmc-exposes-the-fault-lines-in-the-financial-system-/articleshow/71402139.cms">the PMC bank crisis </a>resulted in deaths and suicides of depositors, a lot of customers have been on the edge. The Finance Minister Nirmala Sitharaman today increased the guarantee that the government offers depositors as banks fail – from ₹1 lakh to ₹5 lakh. “A robust mechanism is in place to monitor the health of all banks and the money of depositors are safe,” Sitharaman said in her Budget speech. This is the first time in 59 years that the government moved to increase deposit insurance, after 1961. The five-fold increase is much higher than the market expectations of doubling deposit insurance offered by the government. A deposit insurance scheme is the government’s way of compensating small depositors. The rest of the money will have to be forfeited by the depositors in case a bank shutters down like in the case of PMC Bank, leaving thousands of customers in dire straits. "Bank depositors get a shot in the arm with the upward revision in deposit insurance cover. While this could mean some expenditure for the Bank, this would certainly give comfort to retail savers," said R K Gurumurthy, head of treasury at Lakhsmi Vilas Bank. Last month, the Deposit Insurance and Credit Guarantee Corporation received<a href="https://www.businessinsider.in/business/news/deposit-insurance-corporation-sees-rs-14100-cr-claims-amid-pmc-crisis/articleshow/73016977.cms"> total claims of</a> ₹14,100 crore after the PMC bank scam. Bank frauds had remained dormant for decades: RBI After the scam, millions of customers across all co-operative banks have been worried as panic spread. This was compounded by the fact that the Reserve Bank also sounded an alarm in its financial stability report on the number<a href="https://www.businessinsider.in/policy/economy/news/rbi-financial-stability-report-finds-billions-lost-in-bank-fraud-this-year/articleshow/72998905.cms"> of bank frauds</a>. In the first six months of FY20, as many as ₹2.6 lakh crore worth bank frauds were unearthed by the banking regulator. The report also said that some of these schemes have remained hidden from 2000-01 which was the time that the first dotcom bust occurred. All this and the fall of large financial institutions like IL&amp;FS and DHFL, exposed the many loopholes in the banking system. However, the government chose to expand its own guarantee of these troubled banks instead of taking penal action on the management of these institutions.

India Budget 2020: Bank scam victims are assured of ₹5 lakh instead of ₹1 lakh

Mumbai, Jul 11 () The central bank is engaged with the stakeholders to find a 'workable solution' for Punjab and Maharashtra Cooperative Bank (PMC) as losses are high, RBI Governor Shaktikanta Das said on Saturday. Last year in September, the Reserve Bank of India (RBI) had placed various regulatory restrictions on the multi-state urban cooperative bank on account of financial irregularities, failure of internal control and systems of the bank and wrong/under-reporting of its exposures. The RBI directions were initially for six months, which were later extended till June 22 and then later to December 22, 2020. "With regard to the Punjab &amp; Maharashtra Co-operative Bank, the Reserve Bank is engaged with all stakeholders to find out a workable solution, as losses are very high, eroding deposits by more than 50 per cent," the Reserve Bank Governor said. On June 19, the RBI had said the restriction on PMC Bank was extended till December 22 as the resolution 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 recovery of bad debts also pose challenges/limitations in resolution of the bank," it had said. The central bank had also enhanced the limit for withdrawal to Rs 1 lakh per depositor of the bank from Rs 50,000 earlier. Das further said in case of the urban co-operative banks (UCBs), special efforts are being made to move towards a risk-based and pro-active supervisory approach to identify weaknesses in their operations early. An early warning system with a stress-testing framework has been formed for timely recognition of weak banks for appropriate action, he said. The recent amendments in the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949 will facilitate our supervision processes with respect to NBFCs and UCBs, respectively, he added. HV BAL BAL

RBI engaged with all stakeholders to find workable solution for PMC, says governor

Mumbai, Feb 4 () Maharashtra State Co-operative (MSC) Bank has written to Union Finance Minister Nirmala Sitharaman seeking merger of branches of PMC Bank, in case of a takeover of the troubled lender, a top official said on Tuesday.
Any progress on such a scheme can only happen once the exact extent of the fraud and the liabilities arising are ascertained through a forensic audit, MSC Bank Chairman Vidyadhar Anaskar made it clear.
For the branch merger as opposed to bank merger idea, he explained that MSC Bank is an apex bank for cooperatives and Punjab and Maharashtra Cooperative Bank's multi-state presence makes it difficult to execute such a deal.
"We have written to the Finance Minister, suggesting a branch merger and not a bank merger," Anaskar told reporters here.
He said under the proposed scheme, apex banks in Gujarat and other states where PMC has a presence will take over its branches to make it easier for the transaction to go through.
It can be noted that over Rs 11,000 crore in depositor money has been stuck after the RBI decided to put PMC Bank under instructions in September last year, and appointed an administrator on it after discovering mismanagement.
The bank has been found to have given over Rs 6,700 crore loans to a single company - realty player HDIL - through allegedly fraudulent means and also hid the stress from the Reserve Bank of India by creating to separate books of accounts.
The police has pegged the extent of fraud at PMC Bank at RS 4,700 crore, while other agencies, including the Enforcement Directorate, are also investigating the matter.
A few months ago, NCP leader and Maharashtra minister Jayant Patil had publicly suggested the idea of merging PMC Bank with MSC Bank.
Anaskar said before any progress on the matter, it is essential to ascertain the extent of the fraud at the lender which can only be done after the RBI's forensic audit in the matter.
He, however, also said the RBI may not be averse to a branch merger that the bank is suggesting and such a transaction will not require any changes in laws.
In support of his argument, Anaskar reminisced over six years ago, there was a similar proposal for a branch merger of the troubled Rupee Cooperative bank and the RBI was amenable to the idea.
Meanwhile, the MSC Bank also announced that it has sent two separate proposals to the RBI for merging Rupee and City Cooperative Bank with itself, which will require it to allocate over Rs 1,300 crore of capital.
Both the proposals have been presented jointly with the target banks and after ratification by the cooperatives department of Maharashtra government.
It will have to allocate Rs 980 crore for the Rupee merger, while the City bank scheme will require it to allocate nearly Rs 300 crore.
The genesis of both the proposals is the bank's desire to de-risk beyond the sugar industry by serving the retail segment, Anaskar said, adding that merging the two urban cooperatives banks with itself will give it a retail heft both in distribution and assets.
The total assets of both the banks are Rs 1,400 crore, which will give MSC Bank a good foothold in the retail category, he said, adding that to start with the entire portfolio will be considered as a loss.
Both the proposals involve a support from the Deposit Insurance and Credit Guarantee Corporation, wherein the deposit holders in both the troubled banks will be paid upfront and the bank will subsequently pay-off the DICGC.
Over a third of the depositors' stuck money is released upfront by the DICGC as liquidity support to make a merger possible and then repaid back by the bank once asset recoveries start, he said.
Anaskar exuded confidence that the RBI will give it a go-ahead on both the mergers in about four months' time, despite its own record of having stuck with a mismanagement three years ago.
He said MSC Bank has a total capital adequacy of over 16 per cent, including core buffers at over 14 per cent, and will be able to take care of a merger like this.
At present, the bank is returning excess capital to the district banks which are its members, Anaskar said.
Rupee has five lakh depositors, while City has over 80,000 depositors. AA BAL
BAL

Maharashtra Co-op Bank pitches for branch merger of PMC Bank

Mumbai, Jan 6 () The RBI on Monday revised the Supervisory Action Framework (SAF) for urban cooperative banks to ensure expeditious resolution of financial stress being faced by some of them.
The move comes in the backdrop of the scam in Punjab and Maharashtra Cooperative (PMC) Bank causing distress to over 9 lakh depositors.
"Keeping in view the experience gained, it has been decided to further rationalise the SAF to make it more effective in bringing about the desired improvement in the UCBs as also expeditious resolution of UCBs experiencing financial stress," said a RBI notifications.
The central bank also added that it will continue to monitor asset quality, profitability and capital/net worth of UCBs under the revised SAF.
As per the revised norms, a UCB may be placed under SAF when its net NPAs exceed 6 per cent of its net advances.
Depending upon the severity of the stress, the RBI may ask them to curtail their lending powers, among other safeguards.
An urban cooperative bank could also be placed under SAF when it incurs losses for two consecutive financial years or has accumulated losses on its balance-sheet.
Further, issue of show cause notice for cancellation of banking license may be considered by the Reserve bank "when continued normal functioning of the UCB is no longer considered to be in the interest of its depositors/ public", the notification said.
"Supervisory action already taken under the earlier SAF will be reviewed and revised instructions, if any, will be issued to the UCBs concerned," it added.
Following the exposure of scam in the PMC Bank, which has over 9.15 lakh depositors, the RBI imposed restrictions on withdrawals.
Statutory inspection of PMC by the RBI had revealed large group exposure of about Rs 6,226.01 crore to Housing Development and Infrastructure Ltd (HDIL) Group companies.
Of the total exposure to the HDIL group, only Rs 439.58 crore was disclosed to the RBI, while Rs 5,786.43 crore remained undisclosed. NKD CS BAL

RBI revises supervisory norms for UCBs

Mumbai, Mar 6 () Even as the RBI and the government are assuring the public of their money being safe in Yes Bank, depositors continue to queue up outside branches of the troubled private lender.Several customers are now contemplating opening up new accounts in other banks.There were cases of heated exchange between bank staff and customers, who failed to withdraw money.On Thursday, the Reserve Bank of India (RBI) superseded the board of Yes Bank and imposed a 30-day moratorium after the Rana Kapoor-promoted bank failed to raise capital to address potential loan losses.The bank's depositors are allowed to withdraw cash up to Rs 50,000 from their accounts during the 30-day moratorium period, according to a government gazette.The withdrawal limit, however, can be relaxed up to Rs 5 lakh in case of medical emergencies, higher education and for expenses related to marriages, it said.The rush to withdraw money from the bank continued despite Finance Minister Nirmala Sitharaman, Chief Economic Advisor Krishnamurthy Subramanian and Reserve Bank Governor Shaktikanta Das trying to allay the fear among the depositors."Our salary gets credited on 21st of every month. I am a little worried about my upcoming salary as I have a salary account with Yes Bank. I am going to provide details of my other bank account to HR today so that my money doesn't get blocked," said an MNC employee who was standing in a queue at one of the branches in suburban Mulund.Pradeep Kumar, an engineer by profession, working with a large real estate developer, said, "I have some money right now but I have come to withdraw more since it is the beginning of the month and there are some payments lined up."Kumar had tried to withdraw money yesterday night but ATM went dry before his turn came. Yes Bank has 1,000 branches across the country.To streamline the withdrawal process, some of the branches are giving limited tokens to the customers."The branch manager has refused to give me a token since I reached late. They are giving tokens to up to 130 people," said a customer who was seen fighting with the manager of the branch in suburban Mumbai.Security was also tightened at the bank's headquarters, its branches and ATMs across the city. It's not just salaried customers, but entrepreneurs and small businessmen are also affected."We are a start-up having a current account with the bank. We recently raised money from investors which is lying in the account but we are unable to use it," said a customer who came to a branch in Powai to withdraw cash. He said the company gave salaries to employees two days back but there are payments to be made to vendors."Our clients make payments to us which get deposited into our current account with the bank. We are now sending out communications to our clients not to make payments to our present account," said a visibly disturbed customer who has an IT hardware business.Amidst all of this, she is also trying to get her current account open with other bank so that her clients can transfer the money.One customer at the Kharghar branch said he hopes the country's largest lender State Bank of India will not allow the bank to fail. On Thursday, the SBI board gave its "in-principle" approval to exploring investment opportunities in Yes Bank.The customers said even the mobile and internet banking are shutdown.There was a posse of security men outside the RBI headquarters at Mint Road, which has experienced protests by depositors during the PMC Bank crisis in the recent past.Diagonally opposite, at a Yes Bank branch, a huge stream of depositors could be seen queued up to withdraw their money.At a bank's branch in Colaba, there were similar scenes with a longish queue of depositors.Yes Bank's share tanked 56 per cent to end at Rs 16.20 apiece on the BSE on Friday.While talking to reporters in New Delhi, the Finance Minister said she was in continuous interaction with the RBI who are fully seized of the matter and has assured for a quick resolution."I want to assure every depositor that their money shall be safe. Their monies are safe," she said.The RBI Governor said the resolution of the bank will be done very swiftly."Thirty days which we have given is the outer limit. You will see a very swift action from RBI to put in place a scheme to revive Yes Bank," Das told reporters here.Chief Economic Advisor Krishnamurthy Subramanian also said all options are under consideration for restructuring Yes Bank and assured that depositors' money is safe.This situation reminds one of the plights of depositors of Punjab and Maharashtra Cooperative Bank six months ago.The customers of Mumbai-based urban cooperative bank also went through a similar hardships after the RBI, in September 2019, had superseded the board and the management of the bank.The central bank had put a six-month regulatory restriction on the cooperative bank after it found out certain financial irregularities, hiding and mis-reporting of loans given to real estate developer HDIL.The restriction included barring PMC Bank from lending and accepting fresh deposits. HV BEN AA DC MKJ

Assurances aside, Yes Bank customers queue up outside branches

(Eds: Combining related stories) Mumbai, Mar 5 () In a rare move, capital-starved Yes Bank was on Thursday placed under a moratorium, with the RBI capping deposit withdrawals at Rs 50,000 per account for a month and superseding its board. Yes Bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment. However, it will be able to pay salaries to its over 20,000 employees, the central bank said. The regulatory actions, undertaken by the RBI and the government, came hours after finance ministry sources confirmed that SBI was directed to bail out the troubled lender. For the next month, Yes Bank will led by the RBI-appointed administrator Prashant Kumar, an ex-chief financial officer of SBI. The country's financial sector is already reeling under a spate of setbacks, starting with the high quantum of dud assets at over Rs 10 lakh crore, their slow-paced resolutions despite legal teeth through bankruptcy laws, scandals at non-bank lenders like IL&amp;FS and DHFL, and also fraud at cooperative lender PMC Bank. The last lender to be placed under a similar action was PMC Bank in September last year. While the withdrawal limits have been increased over time to Rs 1 lakh now, many PMC Bank depositors are still in the lurch. There is no provision to handle insolvencies of commercial banks, and the raft of actions come even as the government is working on the FRDI (financial resolution and deposit insurance) Bill. Just like PMC and DHFL, the RBI superseded the board of Yes Bank for a period of 30 days "owing to serious deterioration in the financial position of the bank". The government took the decision of placing the bank under moratorium on an application made by the RBI, a gazette notification signed by Amit Agarwal, joint secretary in the finance ministry, said. The RBI had appointed former deputy governor R Gandhi to the bank's board last year amid the leadership turmoil, caused by the central bank's August 2018 action asking co-founder and chief executive Rana Kapoor to step down by January 2019 on corporate governance concerns. The developments come exactly a year and four days after Ravneet Gill joined the lender, after leaving German bank Deutsche Bank's India operations. Immediately on joining, Gill identified hidden stress of over Rs 10,000 crore, providing for which eroded capital buffers. The bank has been struggling to execute a capital raising plan for the last six months and had been repeatedly assuring all that it sees some hope of funds flowing in. It had also named ace investor Rakesh Jhunjunwala, GMR Group and Citax Holdings as being interested in the bank. Yes Bank's core equity tier-I ratio had slipped to 8.7 per cent as of September. The bank had pushed its December quarter results announcement to March 14, citing hindrances it may pose to the capital raising plan. "The Reserve Bank came to the conclusion that in the absence of a credible revival plan, and in public interest and the interest of the bank's depositors, it had no alternative but to apply to the Central Government for imposing a moratorium under section 45 of the Banking Regulation Act, 1949," an RBI statement said late Thursday evening. It said the bank management had indicated that it was in talks with various investors and was also engaged with a few private equity firms for exploring opportunities to infuse capital. "These investors did hold discussions with senior officials of the Reserve Bank but for various reasons eventually did not infuse any capital. "Since a bank and market-led revival is a preferred option over a regulatory restructuring, the Reserve Bank made all efforts to facilitate such a process and gave adequate opportunity to the bank's management to draw up a credible revival plan, which did not materialise," the central bank said. In the meantime, Yes Bank was facing regular outflow of liquidity, the apex bank said, justifying its actions. As part of the moratorium directions, Yes Bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment, the RBI said. However, it will be able to pay salaries to its over 20,000 employees and also rents, it clarified. The actions come hours after reports of the government directing a consortium of largest lender SBI and life insurance behemoth LIC to bail out the bank emerged. If successful, this will be the first major instance in many years where a private sector lender will be bailed out using public money, with the first instance being Global Trust Bank's amalgamation with Oriental Bank of Commerce in 2003, which was followed with IDBI Bank's takeover of United Western Bank in 2010. The news of a bailout packaged had sent the Yes Bank stock soaring. It closed 25.77 per cent up at Rs 36.85 apiece on the BSE. However, brokerages were not enthused, and couple of them pegged the value of each stock at Re 1 if such a bailout were to happen. Terming it as a "quasi sovereign bailout", J P Morgan said, "we believe forced bailout investors will likely want the bank to be acquired at near zero value to account for risks associated with the stress book and likely loss of deposits". Earlier this year, SBI Chairman Rajnish Kumar had said the troubled bank will "not be allowed to fail". He had also suggested that rival Kotak Mahindra Bank is best suited to take over Yes Bank. AA BEN ABMABM

Yes Bank placed under moratorium; RBI supersedes board

New Delhi, Mar 9 () S&amp;P Global Ratings on Monday said quick resolution of Yes Bank's insolvency will keep India's banking sector contagion at bay, but as credit markets tighten there could be a possibility of wider economic pain in the country. The Reserve Bank last week imposed a moratorium on the capital-starved Yes Bank, capping withdrawals at Rs 50,000 per account and superseding the board of the private sector lender with immediate effect. Following this, country's largest lender State Bank of India (SBI) on Saturday said it will invest Rs 2,450 crore in the troubled private sector bank against 245 crore shares. "The Indian government is working with the SBI to inject capital into Yes Bank, a troubled private-sector bank with 1.8 per cent of the country's bank deposits (as of March 31, 2019). "Quick resolution of Yes Bank's insolvency will keep India bank-sector contagion at bay, though it poses pain for investors in bank hybrid securities. As credit markets tighten, we also see a possibility of wider economic pain in the country," S&amp;P Global Ratings said. It said the Indian government has consistently supported weak commercial banks by promoting the merger of distressed institutions with stronger lenders and has historically not allowed commercial banks to fail and has in the past swiftly stepped in to address trouble. "The current weak economic and high-fear global investment environment, in our view, has prompted the government to support the recovery of Yes Bank. However, in better times, we believe the government would think twice about pushing such a package for relatively small banks," S&amp;P said. SBI will own a minimum of 26 per cent of Yes Bank for the next three years. SBI's ownership should give confidence to depositors and lenders about the bank's solvency, it added. The Reserve Bank has put out a draft resolution plan for Yes Bank allowing SBI to acquire 49 per cent stake. The ents follow Yes Bank's failure to raise capital to address loan losses, sparking a withdrawal of deposits. India's central bank has highlighted serious governance issues at Yes Bank, lapses that have contributed to the institution's steady decline in recent years. Any delay in, or uncertainty about, the implementation of the resolution plan may roil markets, S&amp;P said. "In our view, India's financial sector broadly needs to raise governance standards and restore trust. In the past few years, regulators have identified many governance shortcomings among Indian lenders, most recently at Punjab and Maharashtra Cooperative (PMC) Bank Ltd," S&amp;P said. It said if Yes Bank's resolution process is prolonged, there is a risk the broader banking environment may take a hit. This may raise investors' perception of credit risk in the system, tightening funding. "Many mutual funds hold Yes Bank securities, including subordinated debt and AT-1s. A depreciation in the value of these instruments would hurt credit funds, potentially triggering capital outflows. This could widen spreads and drain the credit available to lower-rated entities," S&amp;P said. The speed of the government action will be critical to provide clarity, it noted. In the past cases of bank failures--such as the collapse of Global Trust Bank Ltd., Nedungadi Bank Ltd., United Western Bank Ltd., Bank of Rajasthan Ltd. and Sangli Bank Ltd.--we have seen swift action that nipped contagion in the bud, S&amp;P added. JD ANSANS

You Searched For "pmc depositor loss" and got 7 results

India Budget 2020: Bank scam victims are assured of ₹5 lakh instead of ₹1 lakh

Katya Naidu

RBI engaged with all stakeholders to find workable solution for PMC, says governor

PTI

Maharashtra Co-op Bank pitches for branch merger of PMC Bank

PTI

RBI revises supervisory norms for UCBs

PTI

Assurances aside, Yes Bank customers queue up outside branches

PTI

Yes Bank placed under moratorium; RBI supersedes board

PTI

Yes Bank insolvency may tighten credit mkt, widen economic pain: S&P

PTI

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