InvestorQ : I have a deposit of Rs.1.10 lakhs with PMC Bank. I want to know 4 things. Is my deposit safe or is the money gone? Is there deposit insurance for my deposit? What happens to my bank mandates since I have a monthly MF SIP? I also have PNB Ac.
Dilmini Mercia made post

I have a deposit of Rs.1.10 lakhs with PMC Bank. I want to know 4 things. Is my deposit safe or is the money gone? Is there deposit insurance for my deposit? What happens to my bank mandates since I have a monthly MF SIP? I also have PNB Ac.

Answer
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Dhwani Mehta answered.
12 months ago


There are quite a few parts to your question, so I will address them one by one. First of all, the PMC Bank saw huge defaults in the last few months and was low on solvency. Also the RBI realized that the bank had 31% of its loan book exposed to the HDIL group and that was not feasible since HDIL itself was in deep financial trouble. To prevent a run on the deposits, the RBI first put a limit of Rs.1,000 that depositors can withdraw from the bank over 6 months. However, after severe protests by depositors, the bank has raised this to Rs.10,000. This is enough to cover around 60% of the deposits to withdraw in full. Now I will address your specific queries in the same order.

· Firstly, I cannot say that your deposit is safe because, you must immediately withdraw the Rs.10,000 at the first opportunity. Since the bank is virtually bankrupt, you will only get a proportion of what is recovered from the bank borrowers. But that will be known only at a later date and not now.

· Regarding deposit insurance, all deposits overall of an individual with a bank are covered up to Rs.1 lakh. This cover is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), which insures your overall deposits (current, plus savings plus FD) up to Rs.1 lakh. Cooperative banks are also covered, so you may not end up losing much. However, that money will take some time to come so your liquidity for now will be limited.

· In case you have any ECS mandate, or SIP mandate or auto debit arrangement with the bank, they will all cease to work immediately since all accounts have been frozen. You must immediately take steps to give a new mandate immediately of a different bank. Also, in case you are redeeming your equity shares or mutual funds, you cannot have a bank mandate of PMC Bank. So, first change your bank mandate before redeeming these funds.

· I don’t think you should have such problems with PSU banks since they have the tacit support of the government. This problem is unique to small cooperative banks and hence you must be careful when you have an account with these banks.