InvestorQ : Is the Guru Raghavendra Bank case in Bengaluru another such case like PMC Bank of Mumbai and what happens now?
prachi Patwardhan made post

Is the Guru Raghavendra Bank case in Bengaluru another such case like PMC Bank of Mumbai and what happens now?

Answer
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9 months ago


Yes it certainly appears to be a case like the PMC Bank in Mumbai because this is also a cooperative bank. The one advantage is that the RBI has acted much faster in this case and hence the damage may be limited. The RBI put restrictions on withdrawals from the bank the moment they realised that there were nearly 62 stressed loans to the tune of Rs.300 crore given by the bank. This was the real bone of contention and to avoid a snowballing of the crisis the RBI decided to restrict the limit on withdrawal to just Rs.35,000 per depositor. This led to huge protests from depositors who had put larger amounts in the bank.

Many people in smaller towns prefer to bank with cooperative banks due to their local flavour and also because they offer higher rates of interest. However, this comes with a default risk as these cooperative banks are not as closely regulated as the other scheduled commercial banks. Hence you need to apply discretion before taking a decision to deposit money in a cooperative bank. For now the restrictions will remain till the time these issues are fully addressed.


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Purvesh answered.
9 months ago


This will be one more PMC on the cards!