InvestorQ : What exactly went wrong with PMC Bank and what do depositors do now? What about their HDIL exposure?
Moii Chavate made post

What exactly went wrong with PMC Bank and what do depositors do now? What about their HDIL exposure?

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Sam Eswaran answered.
1 year ago
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Punjab and Maharashtra Cooperative Bank (PMC Bank) ran into trouble due to its huge exposure to HDIL, a troubled real estate developer in Mumbai. Apparently, the total exposure of the PMC Bank to HDIL is close to 31%, which is more than the 15% that RBI regulations allow any bank to have to any single group. RBI realized that this could be a big risk for the very survival of the bank and hence to protect the interests of the small depositors put a virtual freeze on the bank.

On the first day, RBI had put a limit of just Rs.1000 withdrawal from the bank accounts over the next 6 months. However, following extensive protests from depositors the RBI has now increased the limit from Rs.1000 to Rs.10,000. That means, depositors can now withdraw up to Rs.10,000 during the next 6 months from their accounts when this freeze is on. According to the RBI estimates, this will allow nearly 60% of the depositors to withdraw their balance completely from the bank while another 15% can withdraw a substantial part of their deposits from the bank. This would only leave out the big depositors only from the zone. However, this once again highlights the risk that depositors run when they chase higher interest rates in cooperative banks.

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