In a major relief for customers of the crisis-hit Punjab and Maharashtra Co-operative (PMC) Bank, the Reserve Bank of India (RBI) raised the withdrawal limit for account holders to Rs. 40,000, on Monday. Earlier, this limit was Rs. 25,000.
With the said relaxation, more than 77% of the depositors of the bank will be able to withdraw their entire account balance.
This is the third such hike since September 23
Notably, this is the third time that the banking regulator has increased PMC's withdrawal limit since its clampdown on the co-operative bank on September 23, following revelation of various financial irregularities. Initially, the withdrawal limit was set at a meagre Rs. 1,000 per customer.
Shall continue to take necessary steps in depositors' interest: RBI
"The Reserve Bank of India, after reviewing the (PMC) bank's liquidity position and its ability to pay its depositors, has decided to further enhance the limit for withdrawal to Rs. 40,000, inclusive of Rs. 25,000 allowed earlier," the central bank said, in a statement.
The RBI further said it is "closely monitoring the developments and shall continue to take necessary steps."
What led to the ongoing PMC Bank crisis?
The PMC Bank crisis started after it was found that the higher management of the bank had secretively lent huge loans to the bankrupt Housing Development and Infrastructure Ltd. (HDIL) and its group entities.
The loan amounting to Rs. 6,500 crore was four times the bank's regulatory cap and 73% of its total assets.
Subsequently, RBI put several restrictions on PMC Bank's customer accounts.
Two HDIL directors have been arrested by Mumbai Police
Earlier this month, two directors of HDIL were arrested by the Economic Offense Wing of the Mumbai Police, in relation to the alleged financial irregularities at the firm.
On Monday, a Mumbai court extended police custody of the now-suspended erstwhile chairman of the PMC Bank, in connection with the scam.