What you must know about Punjab and Maharashtra Co-operative Bank

The Reserve Bank of India (RBI) has put operational restrictions on Punjab and Maharashtra Co-operative Bank (PMC Bank) as it investigates the alleged charges of irregularities in the bank. While withdrawals have been capped at Rs 1000 per account, the bank cannot make fresh loans.

For many years, the RBI has been insisting cooperative banks to adopt the RBI's know your client (KYC) norms. Similarly, the central bank has been going after cooperative banks to follow the priority sector guidelines now that they are well-placed in semi urban and rural areas. However, in its inspection, the RBI often noticed laxity on the part of cooperative banks in following its guidelines. The whole idea of stringent KYC process is to put a check on the money laundering.

While the bank is hitting headlines, not many in the market know about the Maharashtra-headquartered co-operative bank. Let's take a look at key details and vital statistics of the PMC Bank:

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Multi-state scheduled bank

PMC Bank is a 36-year old institution. It is a cooperative bank regulated by the RBI and registered under the Cooperative Societies Act. The bank has 137 branches spread over half a dozen states. In fact, the majority of its nearly 100 branches are in Maharashtra. The other states where it has branches include Karnataka (15), Goa (6), Delhi (6) and Gujarat (5) etc. For the last one year, the bank has been focussing on making its loss-making branches profitable.

Key Financials

The bank has a balance sheet size of Rs 13,619 crore. The size is quite small compared to commercial banks. Take, for example, the bank's balance sheet size is equal to some of old private sector banks such as Dhanalakshmi Bank and Catholic Syrian Bank. In the just concluded financial year, the bank earned a total income of Rs 1,297 crore and profits of Rs 99.69 crore. So, it's a profitable bank. A retail bank largely, it was also active in the foreign exchange business. In addition, the bank also gets some income from trading activities. The capital adequacy of the bank stands at 12.62 per cent against the minimum capital adequacy for a commercial bank at 9 per cent.

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Impact on deposit restrictions

The bank has a deposit base of Rs 11,617 crore. Unlike many cooperative banks, the PMC Bank was not offering higher level of deposit rates. The bank's savings rate was 4 per cent per annum for a year as against SBI's 3.5 per cent. The term deposit rate at 7.5 per cent for a year is similar to most commercial banks.

Asset quality

The bank's gross non-performing assets (NPAs) were at 3.76 per cent as on March 2019. The net NPAs were at 2.19 per cent. The NPA levels are much better than those in commercial banks as some of large banks saw gross NPAs crossing the 25 per cent mark. Currently, the NPA levels of some of banks are quite high. The bank has an outstanding loan book of Rs 8,383 crore. The loans are mostly retail in nature (home, car and gold loans). The bank also offers business loans and loans to MSMEs.

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