The Punjab and Maharashtra Cooperative (PMC) Bank has contacted potential bidders, including NBFCs, industrialists and payments banks to aid the troubled lender with a minimum capital infusion of ₹3,500 crore, said two people aware of the matter, requesting anonymity.
This move was taken in light of PMC’s inability to receive any interest from other lenders. Cooperative banks and scheduled commercial banks have refused to bail out PMC bank, as disclosed by people cited above.
According to sources, “This was a good opportunity for non-banks to take over and a third of losses and will also be covered in income tax rebate as PMC has an official universal banking license. Post the amendment of the Banking Regulation Act, cooperative banks were also included in the umbrella of the regulatory framework of RBI. The new investor can appeal for the conversion of a cooperative bank in a small finance bank. The administrator can then approach the RBI to get the bank registered as a private sector bank.”
The decision receives a green signal as the assets and liabilities of the bank will be transferred to the new entity. DICGC can also offer additional support for greater liquidity. This deal shall not benefit the investing bank with any concrete gain but can prove to be an attractive deal for potential investors seeking to gain entry in the banking sector.
Converting PMC into a small finance bank will come with its own set of challenges as this step shall limit its functions. It will have to wait for a long time to convert it in a universal bank and the ultimate fate shall hang from RBI’s terms and conditions.
Last week the administrator of PMC Bank, A.K. Dixit, had invited expressions of interest from potential equity investors with an objective to identify one, able enough to preside over management and revive the bank. PMC bank has a total deposit of 10,727.12 crore rupees, total advances of 4,472.78 crore rupees and gross NPAs worth 3,518.89 crore rupees as on 31 March 2019. Its share capital was 292.94 crore rupees and it reported a net loss of 6.835 crore rupees in FY20. The bank has a negative net worth of 5,850.61 crore rupees.
