This Legal composition eradicates the reasons and allegations that were raised for Punjab and Maharashtra united Bank limited, which began their operations in 1983. It also talks about the extremity that led to dissolvement of the PMC Bank along with throwing a light to the impact on Account holders of the bank. This composition briefly throws a light on the responsibility of the extremity. It provides background on PMC Bank, describing it as a multi-state united bank that grew to 137 branches over 35 times, serving small businesses and containing societies. It also explains that loans to the financially upset real estate company HDIL were not reported as non-performing means, despite signs of trouble, and that HDIL loans reckoned for over 73 of PMC’s total advances. The reproach came to light in 2019 and led to restrictions on deposits, lawless examinations, apprehensions and difficulty for depositors.  


 Punjab and Maharashtra co-operative bank was innovated in 1984 which is a multistate listed state united bank with its area of operation in Maharashtra, Delhi, Karnataka, Goa, Gujarat, Andhra Pradesh and Madhya Pradesh. PMC expanded to 137 branches in span of 35 times. The guests included small businesses, casing societies and institutions. In 1999, All India bank depositors’ association congratulated the bank for the work ethics acquainted to depositors’ service. Within a period of six times the bank bagged the status of listed bank; as in 2000 the RBI conferred listed status to P&M cooperative bank  


  The Enforcement Directorate has filed a plutocrat laundering case in the PMC Bank fiddle, Alleged irregularities case in certain loan accounts. Loans given to financially stressed-out real estate player Housing Developments & structure (HDIL) are at the center of the disquisition. According to FIR filed, HDIL promoters allegedly intrigued with the bank operation to draw loans from the bank’s Bhandup branch. The bank officers did not classify these loans as NPAs, despite payment. Reports estimate the bank’s overall exposure to the HDIL group at around Rs 6,500 Crore (over 73) of all of the bank advances. The bank allegedly created fictitious accounts of companies which espoused small summations of capitalist, created fake reports to hide from nonsupervisory supervision. The bank software was also tampered to conceal those accounts.   


The suppliants are account holders in PMC Bank. The petitioner Nos. 2 and 3 are the parents of suppliant No. 1. The petitioner Nos. 2 and 3 hold four fixed deposits in PMC Bank amounting to a total of ₹ 97 lakhs. The contentions in the writ supplication are that PMC Bank was established in the time 1984 as a Civic Co- operative Bank (hereinafter,” UCB”). It was conferred with the status of a Scheduled Bank in the time 2000 and with the status of a Multi- State Civic United Bank in the time 2004. According to the suppliants, PMC Bank’s periodic reports for the time 2018- 19 showed deposits in excess of ₹ 11,000 crores, income of nearly ₹ 1,300 crores and a profit of nearly ₹ 100 crores, with a net rate of non-performing means of2.19. It’s gratified that the suppliants, being depositors in PMC Bank, were taken by complete surprise when the RBI issued the impugned directives confining the permissible extent of retirement from the amounts deposited by them in PMC Bank. From the various impugned directives placed on record, it appears that PMC Bank was first restrained from granting loans and advances, making investments, incurring arrears and dropping any payments. As far as the suppliants are concerned, the Neutral Citation Number 2022/ DHC/ 005207 effective restrictions against them were that PMC Bank was restrained from releasing amount in excess of ₹ 1,000/- from the total balance in each savings regard or current account or deposit account. This amount was increased to ₹ 10,000/- and latterly to ₹ 25,000/- by posterior directives dated26.09.2019 and03.10.2019. The amount of ₹ 25,000/- was subsequently increased to ₹ 40,000/- by a directive dated14.10.2019, noting that the financial position of PMC Bank had been substantially crippled due to fraud executed on it by certain persons. While adding the amount to ₹ 50,000/- by a directive dated05.11.2019, the RBI noted that 78 of the depositors would thus be suitable to withdraw their entire account balance in PMC Bank. A director was also appointed in respect of PMC Bank by a directive dated26.09.2019. The grievance of the writ suppliants is that the impugned directives put a fetter on their access to their own finances lying deposited in PMC Bank. The suppliants have drawn attention to a fraud committed by various persons in operation of PMC Bank, which led to the substantial erosion of PMC Bank’s financial position. It’s gratified that the forenamed position was a result of shy supervision and control by the RBI, being the regulator of the banking sector. It’s further stated that one of the senior officers of the RBI videlicet, Mr. Laxman Kamble (hereinafter,” Kamble”), who was responsible for supervising UCBs during the period of these irregularities, latterly took employment with PMC Bank.  thus, in addition to allegations of practicable negligence against the RBI, the Neutral Citation Number 2022/ DHC/ 005207 suppliants, in fact, maintain fraud and active conspiracy on the part of the concerned officers of the RBI. Joy Thomas, former MD of PMC wrote an open letter of concession to RBI in 2019. He stressed there was no way of recovery. He wrote that by 2011 the bank had about 1000 crore loan handed to HDIL. Except the many who knew were part of the elderly operation, he confessed that they tried to cover up the irregularities from adjudicators and RBI.  In a detailed affidavit filed before the Bombay High Court the Reserve Bank of India( RBI) has nearly admitted that it was’ cheated’ by the operation of the  swindle  – hit Punjab & Maharashtra Cooperative (PMC) Bank The affidavit, filed by Raj laxmi Sethi, Assistant General Manager, Department of united Bank Supervision, RBI, states that PMC Bank had submitted fraudulently manipulated data to the central bank for sample checks, but” the sample of accounts picked for examination didn’t contain undisclosed HDIL accounts.” While the HDIL accounts shown by PMC Bank were seen by the RBI examination platoon, a maturity of them were declared as non-performing means.  It added that the PMC Bank had also sanctioned mortgage limits to a wholly- possessed attachment of the HDIL when the bank’s Chairman, S. Waryam Singh, was also a director of the company– a clear conflict of interests and violation of the RBI’s Master leaflets to the effect of July 2010 and July 2012.


 1. Impact on deposits Indeed in an extreme situation, if a bank goes void, under void, deposits with all banks are guaranteed under the Deposit Insurance and Credit Guarantee Corporation (DICGC) to the tune of ₹ 1 lakh, including interest. This means that quantities over ₹ 1 lakh could be at trouble in the rare situation that a bank collapses. 

2. Impact on automatic yearly payments- The account holders may have linked their PMC Bank accounts for making automatic payments similar as equated yearly installations (EMIs), regular investment plan (draft) in cooperative fund schemes, insurance decorations, mileage bills,etc., PMC account won’t be debited against payment and bone should directly register  lately with a different bank account for  similar payments to be cleared. Again, to admit tips and redemption of cooperative finances or stocks, the investors having PMC Bank accounts have to link new bank account details. 3. Impact on fiscal requests- The restriction on PMC is doubtful to impact fiscal requests or other private or Public Sector Banks (PSBs) as collaborative banks have stingy dealings in commercial requests since they largely depend on deposits. But just because the RBI has assessed restrictions on PMC Bank, it doesn’t mean that the bank is going into ruin. When RBI imposes a restriction on recessions from one’s account with a collaborative bank don’t sweat directly and rush to the bank to withdraw of quantum from savings and deposits. The bank won’t go into ruin directly and the intent of RBI with the duty of lending and withdrawal checks is to stop any dangerous practices and give the bank the time to repair its fiscal situation.   


 Judgment of the Bombay High Court 13. As the judgment of the Division Bench of the Bombay High Court in Haresh Tekchand Raisinghani7 deals with an analogous issue, it’s applicable to deal with the said judgment in some detail. The challenge therein was inter alia to the RBI directives dated and 14.10.2019. Directions were sought upon the RBI to withdraw the restrictions assessed upon withdrawal of deposits by the depositors. The contentions recorded in the judgment include contentions regarding difficulty to consequential depositors, scores and duties of the RBI and the compass of RBI’s powers under Section 35A of the BR Act. The Division Bench has adverted to the allegations of fraudulent deals against the operation of PMC Bank and consequent misreporting of the fiscal data. The impugned directives have been issued under Section 35A of the BR Act, which has also been considered by the Bombay High Court in Haresh Tekchand Rai Singhania. The provision is set out below” Section 35A in BANKING REGULATION ACT, 1949 35A. Power of the Reserve Bank to give directions. — 1) Where the Reserve Bank is satisfied that– a) in the( public interest); or( aa) in the interest of banking policy; or b) to help the affairs of any banking company being conducted in a manner mischievous to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or c) to secure the proper operation of any banking company generally, it’s necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue  similar directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to act up with  similar directions. 2) The Reserve Bank may, on representation made to it or on its own stir, modify or cancel any direction issued under sub- section (1), and in so modifying or cancelling any direction may put similar conditions as it thinks fit, subject to which the revision or cancellation shall have effect.”   


The HDIL P&MC bank swindle was shocking news for people in banking fraternity and the depositors of the bank. The top operation officers have given huge loan to the HDIL (covering Development and Structure Ltd.) and its associated companies. The amount sanctioned was as huge as it was 70 of the total loan disbursements by the bank. The total amount of fraud was said to be Rs. 4355 Crore, which led to shooting up of the NPA of the bank to 73. The swindle has been called as the failure of the banking system, auditing system, and circle holes in the programs. This is a perfect case to assay the failure of such a system by the hands of numerous officers. Some directors were veritably well- known people in the banking sector and the government sector itself. This case might get concluded soon. This fraud case brought a lot of troubles to the nation and the whole banking sector. The PMC Bank has been in the trust of the RBI, and they’re trying to recover the plutocrat with their means to avoid any farther impact on guests, investors, and shareholders. There’s a hint that several other big banks have given loans to this establishment without proper records.

Author:  Arjit Srivastav, a Student of School of Law, Gd Goenka University


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