“The relaxation has been granted with a view to reducing the hardship of the depositors. The Reserve Bank is closely monitoring the position and shall continue to take further steps as are necessary to safeguard the interest of the depositors of the bank,” the RBI said in a statement.
The amount is the maximum one can withdraw in six months, and includes the Rs 1,000 withdrawal allowed earlier. So the additional the customer can withdraw now is Rs 9,000.
This was done “on a preliminary assessment of the bank’s latest depositor and liquidity profile as furnished by the administrator,” the RBI said.
With the relaxation, “more than 60 per cent of the depositors of the bank will be able to withdraw their entire account balance,” the RBI said in a statement.
The statement said the RBI was forced to clamp down on deposit withdrawal from the bank “on account of major financial irregularities, failure of internal control and systems of the bank and wrong/under-reporting of its exposures under various off-site surveillance reports to RBI that came to the Reserve Bank’s notice recently.”
The central bank had not elaborated on the reasons earlier, but its sudden decision to limit withdrawal to only Rs 1,000 caused a huge panic among depositors. RBI maintained that this was done to protect depositors’ interest.
Depositors from all branches in Mumbai gathered around the Sion branch in the morning to protest against the move. At the same time, the bank staff, including branch managers, protested outside the residences of senior officials of HDIL, including that of Waryam Singh, chairman of PMC Bank and former director of HDIL.
The bank had lent more than Rs 2,000 crore, out of its total loan book of Rs 8,383 crore, to HDIL and related entities, which is now in bankruptcy.
Interestingly, even HDIL was taken to the bankruptcy code by the lenders, PMC Bank drew two pay-orders on August 31 totaling Rs 96.5 crore for HDIL promoter Sarang R Wadhawan to repay non-convertible debentures of HDIL invested by Bank of India.
The bank’s now suspended managing director and chief executive Joy Thomas said this was done to safeguard PMC Bank’s own interest as HDIL being in the bankruptcy court would mean its assets would be attached by other lenders as well.
JB Bhoria, RBI-appointed administrator in the bank, said on Wednesday the bank had enough assets to honour the due to depositors, and told them not to panic.
A banner pasted outside the bank assured the customers that their money “is in safe hands,” and that the customers should give their support and “trust us at the moment” because the restriction is only for a temporary period.