MUMBAI: The Reserve Bank of India has ordered Punjab and Maharashtra Co-operative (PMC) Bank not to do any business for six months and capped depositor withdrawals at Rs 1,000, throwing the lives of thousands of traders, self-employed and daily wage earners into disarray. The regulator has also appointed an administrator for the bank.
Defaults appear to have surged in the past six months amid tight economic conditions and some lumpy loans to real estate companies located in the financial capital that turned sour, making it difficult for the bank to meet its commitments, two people familiar with the matter said.
The sudden freeze ahead of the festival season is set to upset calculations of customers and deal a big blow to a state that is heavily reliant on the cooperative bank structure to service millions of customers in its villages. The development comes at an awkward time for the state government in Maharashtra, the BJP, and other political parties such as the NCP and the Congress, which are known to have a strong support base among the customers of cooperative banks. The state goes to polls in October.
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