PMC Bank was about to go private

Exclusive: The move would have enabled the bank to give out even bigger loans easily

Punjab & Maharashtra Cooperative (PMC) Bank was about to go private, sources have told mid-day. Employees said the bank had been working towards this goal for at least three years and had recently applied to RBI for a private banking licence. Turning private would have taken the bank out of the purview of the Registrar of Cooperative Societies and put it under the direct supervision of the Reserve Bank of India.

Already, PMC Bank was among a few cooperative banks that were allowed to deal in foreign exchange and all its big branches had forex facility. The bank would also have been able to give out bigger loans easily, get a pan-India presence and expand overseas. However, financial irregularities came to light and the bank went under administration.

"We had to achieve R20,000 crore in deposits to get a private banking licence," said an employee of several decades. "We were asked to work on public holidays and Sundays. In April 2019, we were told the target was achieved in a congratulatory mail. The process of obtaining a private banking licence was underway. The RBI notification imposing restrictions on the Bank came as a shock."

A PMC Bank branch. Pics/Sayyed Sameer Abedi

Chartered Accountant and Cooperative Societies expert Ramesh Prabhu said only one cooperative bank has managed to successfully turn private — Development Cooperative Bank, which became Development Credit Bank. "Being private gives more valued additions to stakeholders, something not possible in cooperative banks," said Prabhu. "There are also restrictions in issuing loans in cooperative banks. In a cooperative bank, it is one-man-one-vote, while in private banks the management election is based on capital."

Advocate Vinod Sampat, who also specialises in cooperative societies issues said going private would have enabled the bank to disburse higher loan amounts. "A cooperative bank is under the supervision of the Registrar of Cooperative Societies and Reserve Bank of India, whereas a private bank is directly under RBI," said Sampat. "There is political and management interference in cooperative banks, which is not the case in private bank."

PMC General Manager LM Kamble claimed ignorance about the bank's efforts to go private. But former director Amarjit Singh Kochhar, whose father was the founder chairman of the bank in 1984, confirmed the development. "A few months ago, MD Joy Thomas told me they were in the process of going private and that they have managed to gain deposits of R22,000 crore," said Kochhar. "Thomas said that, as a cooperative bank, they had a lot of restrictions. For instance, they were unable to think about employee welfare and increase salaries."

Kochhar said his only fear was that if the bank became private, its name would be changed. "The name had emotional value, as it brought Punjab and Maharashtra together. The logo symbolised a handshake between the two states. Thomas assured me that name will remain unchanged and that even after privatisation, branches will continue to have a photograph of founders Sardar Gurucharan Singh and Charanjeet Singh Chheda." Meanwhile, Sikh community members appealed to Sikh institutions and large depositors to hold their deposits for at least two years even after RBI lifts restrictions to ensure the Bank's revival and protect the community's interests.

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