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Old 16th October 2019, 12:27   #1
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Default PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lakh?

I frankly find it ridiculous that the government will write off big loans of PSU banks as bad debt, keep funding the white elephant Air India in tens of thousands of crores and yet, not do anything for the common man who thinks his money is safe in the bank?

Where are the regulations? Where are stronger insurance policies or systems that safeguard my deposits? Where are the damn checks & balances? Why do I get only 1 lakh rupees if my bank shuts down?

Every day, I'm reading more & more stories about depositors crying, suffering heart attacks or dying because of the PMC Bank crisis. If the money of citizens isn't safe in a damn bank, where the heck will it be?

What I personally do = spread my funds across reputable banks (including, but not limited to, PSU banks). Absolutely won't put all my eggs in one basket. No co-operative banks or small players like IDFC for me.

Full News Article

Quote:
Despite numerous protests, there seems to be no respite in sight for Punjab Maharashtra Co-Operative (PMC) Bank's account holders. On Tuesday, Fattomal Punjabi, 61, a Mulund resident, died of cardiac arrest while on his way to the bank. Police said on Tuesday that a depressed account holder, Dr Nivedita Bijlani, 39, killed herself by consuming sleeping pills on Monday night. Sanjay Gulati, 51, an Oshiwara resident and a former pilot, had died of a heart attack on Monday.

Gulati, a former Jet Airways employee, had over Rs 90 lakh with the bank. For the last couple of days, Gulati had been attending various protests in the city. On Monday morning, after attending one such protest outside a city court along with his 80-year-old father, Gulati returned home, where he suffered a cardiac arrest at dinner time, said a senior officer at Oshiwara police station. He was rushed to Kokilaben Hospital by his wife Megha and a couple of friends, where doctors declared him dead on arrival.
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Last edited by GTO : 16th October 2019 at 12:37.
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Old 16th October 2019, 12:38   #2
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

I think the rot is deeper than anyone is declaring. There are so many frauds and junk deals which Indian Businessmen, Banks and Politicians have cooked up at the cost of Indian common man's, white, post tax income.

No one is able to understand who to catch and what to do and how to resolve this. YesBank, PMC, India Bulls, all seem to have a very suspicious operational record. Not to mention huge regulatory gaps in sectors like telecom.

Apart from a few directors and employees, everyone else is completely left happily.

Same goes with all tax that we pay. Where is the government P&L? Where is the transparency?

I know that this a borderline political statement, but I dont think the current administrators have a clue of whats happening in the economy. The ridiculous statements like movie collections is baffling!

Whatsapp forward received which completely resonated with me
  • People who have deposited money in banks are worried
  • People who have cash stored at houses are worried
  • People who have invested in Real Estate are worried
  • People who have invested in stocks are worried

Basically only a select few are gaining in the whole economic crisis which has been built up over the years.

Last edited by 2000rpm : 16th October 2019 at 12:41.
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Old 16th October 2019, 12:40   #3
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

Very interesting subject in India.

Why there is no law to punish the culprits? But there are thousands way to punish those who kept their hard earning money in those bank.
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Old 16th October 2019, 12:44   #4
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

The problem is with the word "Co-operative Banks"

It sounds secure, warm and fuzzy. Quoting from today's Broadsheet

What are Co-operative Banks?


Quote:
These are small public sector banks that were created to help small businesses and farmers get loans. They are 'cooperative' in that its customers are also its owners. They are more loosely monitored by the Reserve Bank of India. There are 1,551 such banks in the country, and PMC is one of the top five urban co-op banks. It has 137 branches and 51,000 members spread across seven states—but is most heavily concentrated in Maharashtra.
I will hazard a bet that depositors had no idea that they were shareholder and should have made the management accountable to them.

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Where are the regulations? Where are stronger insurance policies or systems that safeguard my deposits? Where are the damn checks & balances? Why do I get only 1 lakh rupees if my bank shuts down?
As mentioned above, regulations were very loose, the Dewans invested Rs 15-10 Lakhs and walked off with Rs 8000 Crs . Regulations did not mandate insurance or any specific coverages. The Government does not have the direct liability to compensate the depositors BUT they have the indirect liability of permitting improper regulation.

What should the Government do?

Am in armchair cloud cuckoo land butt my two cents
  • Seize assets of the directors
  • Hunt and seize all Dewans assets
  • If viable, take over HDIL and use its powers to turn it around and use proceeds to recompense the depositors

However, it is a slow process and very uncertain

Some sad stories from this

Now is the time, to move deposits and holdings to more reputable banks. If your bank has no reputation and known to be a "phone" bank (where politico's or tycoons" call for loans at a drop of a hat!) Run!

Last edited by ajmat : 16th October 2019 at 17:23.
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Old 16th October 2019, 12:50   #5
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

This news was a huge downer and a scary one at that.
I have spread family investments across SBI, HDFC, ICICI and Citibank (had Yes Bank & IDBI but have since maintained only minimum balance in these).

That said, this entire saga makes me wonder whether one should immediately invest in a tangible asset the moment one is flush with cash or keep having FD/ liquid in the bank. One thing I do for sure is max out my PPF account (which is backed by the central govt.) but even that makes me wonder at times. Phew!
Heart rending for the PMC bank users. My prayers go out for them.
PS: Agree on the Air India financing by the govt. It should have been either shut down or sold off years ago

Last edited by ValarMorghulis : 16th October 2019 at 12:51.
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Old 16th October 2019, 13:16   #6
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

However, I don't think depositors in scheduled (mainstream) banks have ever lost money since nationalization. The last time a bank shutdown was in 1994 (Global Trust Bank). Depositors lost nothing - Govt forced Oriental Bank of Commerce to acquire GTB.
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Old 16th October 2019, 13:17   #7
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

I was just checking , seems like we have an organisation called DICGC ( Deposit insurance and credit Guarantee corporation ) which insures depositors over unforeseen events. It would seem that irrespective of the value of deposits that we have in the bank, this organisation would only insure up to 1L. What a joke.

Drawing parallels , FDIC ( Federal Deposit insurance corporation ) of the US guarantees complete refunds in the event of grand larceny, fire , floods etc. I don't know if it covers willful fraud, which is the case with PMC .

Last edited by srini1785 : 16th October 2019 at 13:22.
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Old 16th October 2019, 16:54   #8
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

Quote:
Originally Posted by SmartCat View Post
However, I don't think depositors in scheduled (mainstream) banks have ever lost money since nationalization. The last time a bank shutdown was in 1994 (Global Trust Bank). Depositors lost nothing - Govt forced Oriental Bank of Commerce to acquire GTB.
It was opened in 1994 and shut/taken over in 2004.
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Old 16th October 2019, 17:03   #9
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

Govt is saying: "to hell with your rainy day assets"! It's better not to put one's money in any of these local banks. Down south we have "LVB": "Lakshmi" has changed her "Vilas" from this "Bank"! It's basically the directors and higher ups doling out loans on recommendations and for commissions and siphoning off huge sums of money. Corruption is omnipotent, only hope LIC is spared. This is Kalyug and we haven't seen the worst yet, it's our kids that will suffer most. We're leaving behind a fantastic legacy for our kids and future generations. Don't ever think that jewels in the locker are safe, that also has the same ₹ 1 lakh limit. Go get your luxury German and enjoy life rather than save!!

Last edited by Durango Dude : 16th October 2019 at 17:26.
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Old 16th October 2019, 17:27   #10
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

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Originally Posted by Durango Dude View Post
.....Go get your luxury German and enjoy life rather than save!!
Is this where we are being pushed towards? A world of spending, living by the day, where savings are not encouraged - either directly or indirectly.
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Old 16th October 2019, 17:35   #11
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

As a young chap who has just started investing, while all my friends are spending heavily on international vacations and luxury SUV’s like there’s no tommorow. These things really scare me as to whether my investments will pay me down the line or will they just go down the drain, why am I saving 75% of my salary in my 20s as there’s no guarantee whether I can have access to them or not.
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Old 16th October 2019, 17:52   #12
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

I came across this Whatsapp forward and apparently it's from some HDFC branch.

PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lakh?-img20191016wa0016__01.jpg

I'm not well versed with economy so can't say much about what is happening. But I did see on my bank statement that the interest rates will be lower than 3.5% if my account holds over 1L. I mean, where do I keep my money? On one side, I'm expected to pay Income Tax, Professional Tax, House Tax, Water Tax etc and on the other, government wants me to invest in different things where even they're not sure if my money is safe! Something is seriously wrong with our economic setup and it's been going on since a long time.

I've already suffered once in shares and I really don't like to invest in something which is volatile. I'll be dead if my savings go for a toss and I'm handed 1L rupees. This is a really scary situation.

Last edited by BoneCollector : 16th October 2019 at 17:59.
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Old 16th October 2019, 18:03   #13
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

Just curious to know what happens to the employees of PMC bank? I am sure bank won't keep functioning for long. Where would the employees go in that case.
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Old 16th October 2019, 18:10   #14
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

I think the regulation was put in place when income levels were much lower than what they are at the moment. Hence very people used to have 1 lakh in the banks. The insurance for deposits should have been revised periodically. In the current age 1 lakh is too less, and it is not limited only to current / savings account but also to fixed deposits.

For the knowledgeable people, it should be a good practice to keep amounts less than 1 lakh in bank accounts and rest should be there in liquid funds / arbitrage funds. Money is safer there than the banks.
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Old 16th October 2019, 18:11   #15
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Default Re: PMC Bank: How bank closures & scams affect common men. Why is the protection only up to Rs 1 lak

Quote:
Originally Posted by Vasuki View Post
It was opened in 1994 and shut/taken over in 2004.


Quote:
Originally Posted by GTO View Post
I frankly find it ridiculous that the government will write off big loans of PSU banks as bad debt
"Writing off" loans is just an accounting action. The bank will still pursue the defaulters, go after the promoters' assets and try to recover the money. When they recover a part of the loans given, this amount is "written back" into the balance sheet. Eg:

SBI clarifies Mallya loan ‘write off’ is not a loan waiver
https://www.hindustantimes.com/india...2jLIyUhTO.html
“So there is a little bit of malapropism involved in this. Don’t go by literal meaning write-off. Write-off does not mean loan waiver. Loan still remains. You still continue to pursue,” Jaitley said.

Quote:
Where are the regulations? Where are stronger insurance policies or systems that safeguard my deposits? Where are the damn checks & balances? [b]Why do I get only 1 lakh rupees if my bank shuts down?
There is a strong financial reason for keeping the deposit insurance amount low. If unlimited deposit amount is insured by Govt, then there is no reason for depositors to carefully pick a well run bank for their needs. That means, there will be no difference between "Mallya Bank" and "HDFC Bank". As a depositor, you will invest with Mallya Bank despite knowing that it is a poorly managed bank run by a fraud. There is no need for "lower quality" banks to offer higher interest rates, because depositors will invest there anyway.

Basically, low deposit insurance ensures that banks compete for your deposits. And it automatically rewards well run banks like HDFC Bank (they can offer low interest rates on deposits, but have no issues garnering deposits) and penalizes poorly managed banks (co-operative banks, for example. They have to offer higher interest rates to depositors)

Last edited by SmartCat : 16th October 2019 at 18:35.
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