Crisis-ridden Punjab and Maharashtra Bank (PMC) has received three final bids from potential acquirers and the evaluation to decide the winning bidder is underway, said Reserve Bank of India (RBI) Governor Shaktikanta Das on February 5. Once the evaluation is over, the co-operative bank will approach the central bank with the proposal, said Das.
The governor’s comments indicate that the resolution for the crisis-ridden co-operative bank may happen in the near future.
“I have been informed that final offers have been received. Again, I’m given to understand that PMC Bank is evaluating the offers. After the evaluation is over, they will approach us. It is under evaluation. (Sic),” said Das at a presser that followed the RBI monetary policy announcement.
Among the potential bidders for the bank are UK-based Liberty Group, a combine of Centrum group and BharatPe. That apart, two business families from Mumbai and Hyderabad have expressed interest in buying the Mumbai-based cooperative bank, according to media reports.
The RBI on December 18 said PMC Bank has received four Expressions of Interest (EoI), but did not specify the suitors. The banking regulator also extended the restrictions on PMC Bank by another three months till March 31, 2021.
“The bank has informed Reserve Bank that in response to EoI, four proposals have been received. These proposals will be examined by the bank with regard to their viability and feasibility taking into account the best interest of the depositors. To undertake this process, the bank would need some more time,” the central bank said in a statement then.
At the time of inviting EoIs, the PMC Bank had said that subsequent to the commencement of the normal day-to-day operations, it will be open for the investors to convert the bank into a Small Finance Bank by making an application to the RBI.
This, however, will be subject to compliance with the RBI guidelines on Voluntary Transition of Primary (Urban) Co-operative Banks (UCBs) into Small Finance Banks (SFBs) dated September 27, 2018, PMC Bank said. Eligible investors could be Financial Institutions, including banks and NBFCs and individuals or Group of Individuals/ companies, societies, trusts or any other such entities having adequate net worth, the bank said.
According to the details of the proposal, the investor should bring in the capital required for enabling the bank to achieve the minimum required capital to risk-weighted assets ratio (CRAR) of 9 percent. The investors can later explore the option of restructuring a part of deposit liabilities into capital/capital instruments, the bank said, adding, it may also approach DICGC for its support for payment up to Rs 5 lakh to depositors.
After due evaluation, the viable proposal(s) will be forwarded to the RBI for its consideration for preparing a draft scheme of reconstruction and other consequential action under Section 45 of Banking Regulation Act, 1945, the proposal had said.
The RBI had superseded the board of PMC Bank in September 2019 after a fraud was detected. About 70 percent of its total loan book of Rs 8,383 crore as on March 31, 2019, had been taken by real estate firm HDIL. The bank had Rs 11,600 crore in deposits. The police arrested Joy Thomas, former managing director of PMC Bank, in October. The investigators have since made a few more arrests.
During investigations, it was found that the bank had been allegedly running fraudulent transactions for several years to facilitate lending to HDIL through fictitious accounts and violating single-party lending rules. The RBI imposed restrictions on deposit withdrawals and superseded its board after the fraud was detected. The central bank later withdrew the restrictions in phases. Still, a section of the PMC Bank depositors is yet to get their deposits back.