Recently the Reserve Bank of India has imposed limitations, initially for a period of six months, on the withdrawal of amount by account holders of which one of the following banks?
- (a)IndusInd Bank
- (b)Dhanlaxmi Bank
- (c)Punjab and Maharashtra Cooperative Bank
- (d)South Indian Bank
Correct — C, Punjab and Maharashtra Cooperative Bank. On 23 September 2019 the Reserve Bank placed the bank under directions for six months and initially capped withdrawals at Rs 1,000 per account — a limit so tight that it caused public alarm and was raised within days to Rs 10,000, then to Rs 50,000 in November 2019 and to Rs 1,00,000 in June 2020. The reason was a concentration of credit that should never have existed: of a loan book of about Rs 8,300 crore, roughly Rs 6,226 crore, some 73 per cent, had gone to a single borrower group, Housing Development and Infrastructure Limited, and the exposure had been concealed behind dummy accounts for years. The bank was eventually merged into Unity Small Finance Bank on 25 January 2022.
- (a)IndusInd Bank — A scheduled commercial bank that was trading normally in 2019 and was under no such restriction.
- (b)Dhanlaxmi Bank — A small old private-sector bank from Kerala. It had been under the Reserve Bank's prompt corrective action framework earlier in the decade, which is what makes the name plausible, but that is supervisory oversight rather than a cap on depositor withdrawals.
- (d)South Indian Bank — Another Kerala-based private bank operating normally at the time. It is in the list only to make the choice among four bank names harder.
Urban co-operative banks in India were long answerable to two masters — the Reserve Bank for banking regulation and the state registrar of co-operative societies for management. That divided control is what let a failure of governance on this scale run undetected. After the collapse, the Banking Regulation (Amendment) Act, 2020 brought co-operative banks substantially under Reserve Bank supervision, and deposit insurance cover under the DICGC was raised from Rs 1 lakh to Rs 5 lakh per depositor per bank.
The question is answerable from the phrase co-operative in the option list once you know that the 2019 story was about a co-operative bank rather than a commercial one, and the three distractors are all ordinary private-sector banks. What makes the episode worth remembering beyond the name is the chain it set off: the withdrawal cap, the depositor protests, the raising of insurance cover, and the change in the law on co-operative bank supervision. Present-day note: the depositor limits are history, since PMC Bank ceased to exist as a separate entity when it merged into Unity Small Finance Bank in January 2022.
- The Reserve Bank placed PMC Bank under directions on 23 September 2019, initially for six months.
- Withdrawals were first capped at Rs 1,000 per account, raised to Rs 10,000 within days, Rs 50,000 in November 2019 and Rs 1,00,000 in June 2020.
- About Rs 6,226 crore of a roughly Rs 8,300 crore loan book, some 73 per cent, was exposed to Housing Development and Infrastructure Limited.
- The Banking Regulation (Amendment) Act, 2020 brought co-operative banks more fully under Reserve Bank supervision.
- PMC Bank was merged into Unity Small Finance Bank on 25 January 2022.
- Reaching for a large commercial bank name; the 2019 episode was a co-operative bank failure.
- Assuming the six-month limit ran its stated course; the caps were eased repeatedly and the restrictions ran far longer than six months.
As a name-the-institution current-affairs item, or as a statement-set on co-operative bank regulation and deposit insurance.
No directly related past PYQ was found.
- practice — not a real PYQ
Deposit insurance cover per depositor per bank under the DICGC was raised in 2020 from Rs 1 lakh to
- (a)Rs 2 lakh
- (b)Rs 5 lakh
- (c)Rs 10 lakh
- (d)Rs 15 lakh
Answer(b) Rs 5 lakh — the increase followed the co-operative bank failures that left depositors unable to access their money.
- practice — not a real PYQ
The Banking Regulation (Amendment) Act, 2020 is chiefly significant because it
- (a)nationalised the remaining private banks
- (b)brought co-operative banks more fully under Reserve Bank of India supervision
- (c)abolished the statutory liquidity ratio
- (d)created the Insolvency and Bankruptcy Board
Answer(b) brought co-operative banks more fully under Reserve Bank of India supervision — the response to the divided control exposed by the PMC Bank failure.