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The Reserve Bank of India (RBI) has extended the validity period of its ‘directions’ against scam-hit Punjab and Maharashtra Cooperative (PMC) Bank for a further period from April 1, 2021 to June 30, 2021, subject to review.

PMC Bank, a Multi-State Urban Cooperative Bank, was placed under all-inclusive directions by the RBI under the Banking Regulation Act 1949, with effect from close of business on September 23, 2019.

Offers from investors

The RBI, in a statement, said the cooperative bank had received binding offers from certain investors for its reconstruction, in response to the Expression of Interest (EOI) dated November 3, 2020, floated by the bank.

The RBI and PMC Bank are presently engaging with prospective investors in order to secure best possible terms for the depositors and other stakeholders while ensuring long-term viability of the reconstructed entity, the statement added.

“Given the financial condition of the PMC Bank, the process is complex and is likely to take some more time.

“In the circumstances, it is considered necessary to extend the aforesaid directions….It may be clarified that the process of reconstruction will be commenced as soon as the aforesaid objectives are achieved to the best possible extent,” the statement said.

The three investors who have shown interest in buying PMC Bank are Centrum Group-BharatPe combine, UK-based Liberty Group and Ideal Group.

PMC Bank was placed under directions by the RBI due to its poor financial position and negative net worth .

The directions were necessitated as the RBI came across a nexus between borrowers (promoters of a real estate group) and some bank officials, with the alleged fraud/ financial irregularities pegged at about ₹4,355 crore.

The EOI was floated to identify a suitable equity investor/ group of investors willing to take over management control so as to revive PMC bank and commence regular day-to-day operations.

As per the EOI, subsequent to commencement of the normal day-to-day operations, it will be open for the investor(s) to convert the bank into a Small Finance Bank by making an application to the RBI.

“The investor(s) should ideally bring in the capital required for enabling the bank to achieve the minimum required capital to risk weighted assets ratio (CRAR) of 9 per cent.

“However, the investors may explore the option of restructuring a part of deposit liabilities into capital/capital instruments,” the EoI said.

The bank may also approach DICGC for its support for payment up to ₹5 lakh (insured deposits) to depositors under the provisions of the DICGC Act, 1961, it added.

According to the EOI, PMC Bank was having total deposits of ₹10727.12 crore, total advances of ₹4472.78 crore and gross NPA (non-performing asets) of ₹3518.89 crore as on March 31, 2020.

Negative net worth

Further, the share capital of the bank is ₹292.94 crore. However, the bank registered a net loss of ₹6,835 crore during 2019-20 and has a negative net worth of ₹5,850.61 crore, as per the EOI.