EoI floated: PMC Bank looks for new investors

New investors looking to revive Punjab & Maharashtra Co-operative (PMC) Bank must be willing to take a controlling stake in the lender, according to the bid document put out by administrator AK Dixit. The administrator on Tuesday invited expressions of interest (EoIs) from prospective equity investors with a view to carrying out a reconstruction of the bank. The objective is to identify a suitable equity investor or group of investors willing to take over management control so as to revive the bank and commence regular day-to-day operations.

“Subsequent to commencement of the normal day-to-day operations, it will be open for the investor(s) to convert the bank into a small finance bank by making an application to the Reserve Bank of India subject to compliance of the central bank guidelines on voluntary transition of primary (urban) co-operative banks (UCBs) into SFBs dated September 27, 2018,” the document said.

The investor should ideally bring in the capital required for enabling the bank to achieve the minimum required capital to risk weighted assets ratio (CRAR) of 9%. They may also explore the option of restructuring a part of deposit liabilities into capital or capital instruments. The bank may approach the Deposit Insurance and Credit Guarantee Corporation (DICGC) for its support to pay up to Rs 5 lakh to depositors. After evaluation, viable proposals will be forwarded to the RBI for its consideration for preparing a draft scheme of reconstruction and other consequential action under Section 45 of the Banking Regulation Act, 1945.

PMC Bank had total deposits of Rs 10,727.12 crore, total advances of Rs 4,472.78 crore and gross non-performing assets (NPAs) worth Rs 3,518.89 crore as on March 31, 2020. The share capital of the bank is Rs 292.94 crore. It registered a net loss of Rs 6,835 crore during FY20 and has a negative net worth of `5,850.61 crore.

Dixit also wrote a letter to the bank’s customers with an update on operations ranging from cost-cutting initiatives to loan recovery measures. It said that PMC Bank has already initiated actions for recovery of bad debts, including from accounts of the HDIL group. It also mentioned steps taken to control costs and cut expenses – rationalisation of the branch network, surrendering of premises and re-negotiation of rents. “While maintaining essential IT systems, we have rationalised telecom lines and have cut down the expenses on outsourcing. Staff expenses have also been substantially reduced. In short, a hard look is being taken at every expense,” Dixit said in the letter.