Every time a crisis such as PMC surfaces, there’s some sympathy over the plight of depositors, and debates around the need to regulate cooperative banks better.
The Indian co-operative credit movement has its origins in the late 19th century. When Kiran Gupte saw televised images of anguished depositors breaking down and weeping outside the branches of Punjab and Maharashtra Co-operative Bank (PMC) over the last fortnight, bitter feelings came flooding back. Since 2014, whenever he has heard of someone considering depositing money in a cooperative bank, he has advised them against it, because he wouldn’t want anyone to go through what he has. When the Reserve Bank of India (RBI) placed Mumbai’s CKP Co-operative Bank under restrictions on withdrawals and lending in 2014, it changed Gupte’s life. Nearly Rs 12 lakh, about 85% of his life’s savings, are stuck at the bank, with no clarity on if and when he might get the money back.
“I really don’t know what will happen to us now,” says the 72-year-old former employee with a chemical company, who lives with his wife in Dombivali in Mumbai.
He found CKP attractive for the higher interest rate on fixed deposits the bank offered, compared with larger state-owned or private commercial banks.
Gupte has only managed to get Rs 15,000 from his savings account and has not been getting interest on his fixed deposit, which amounts to Rs 85,000 annually, for five years now. A group of depositors sends periodic representations to banking authorities and the prime minister. They haven’t heard much back.
Gupte is among the tens of thousands of depositors who are faced with financial ruin as a consequence of the potential folding of a poorly managed or fraud-hit cooperative banking institution.
PMC Bank, which has lately been in the news for fraudulently extending loans to Housing Development & Infrastructure Ltd (HDIL), imperilling deposits of numerous customers, is just the latest in a series of cooperative banks that have been placed under restrictions by the RBI. As of March 2019, 26 urban cooperative banks (UCBs) were placed under directions of the central bank for putting depositors at risk, thanks to mismanagement or fraud. This means operations are restricted and, often, deposits are stuck.
Every time a crisis such as PMC surfaces, there’s some sympathy over the plight of depositors, and debates around the need to regulate cooperative banks better. But then the world moves on, leaving hapless depositors to […]