PMC Bank crisis: Housing societies stare at cash crunch as funds remain locked up
At least eight co-operative housing societies in Manish Nagar have their accounts, with amounts ranging between Rs 40 lakh and Rs 1 crore, deposited in PMC Bank’s Versova branch.Updated: Dec 15, 2019 05:42 IST
The restrictions imposed by the Reserve Bank of India (RBI) on Punjab and Maharashtra Co-operative (PMC) Bank on September 23 have pushed several housing societies in the city on the brink of a financial crisis. The central bank had capped the withdrawals from PMC Bank to Rs 50,000 for six months, after a fraud worth Rs 4,855 crore, in which several of the bank’s executives are allegedly involved, came to light in September.
“Of the 35,000 co-operative housing societies registered in the city, around 2,000 have their accounts or deposits in PMC Bank,” said Ramesh Prabhu, chairman of Maharashtra Societies Welfare Association.
Until 2013, it was mandatory for co-operative housing societies in the state to deposit their funds only in co-operative banks. On December 5, 2013, the Maharashtra Co-operative Societies (MCS) Act, 1960, was amended, allowing societies to deposit their money in a nationalised or regional banks. However, the interest earned on the deposits in co-operative banks are tax free, while those earned on deposits in nationalised or regional banks are taxable, owing to which, many societies continued to opt for co-operative banks despite the amendment.
“The tax-free option in co-operative banks is an obvious temptation for housing societies. Thus, most of the societies continue to bank with co-operative banks. Also, many societies don’t know about the amendment, and thus don’t deposit money in nationalised or regional banks,” said Deepak Rupani, a Bombay high court lawyer and member of Yogi Krupa Society in Andheri.
Located at Manish Nagar, Rupani’s society had to undergo urgent repair works, after a structural audit, earlier this year, revealed that the building had developed damages. However, the society has postponed the repair work indefinitely, as its funds, worth ₹50 lakh, is locked-up at PMC Bank. “Our building is 40 years old and the last structural repair was conducted four years ago. But as we cannot withdraw any money from our account at PMC Bank, we have postponed repair work indefinitely for now. The top floors of our seven-floor building are not receiving much water owing to some problems. But our society cannot even undergo any plumbing work right now,” he added.
The society has asked its members to pay the maintenance fee of two months in advance, to help pay bills and salaries of housekeeping staff.
At least eight co-operative housing societies in Manish Nagar have their accounts, with amounts ranging between Rs 40 lakh and Rs 1 crore, deposited in PMC Bank’s Versova branch.
Another society in the premises, Kanchanjunga Co-operative Housing Society, is unable to make payments to its contractors who conducted repair works as its funds worth ₹90 lakh are locked up at PMC Bank.
Owing to some internal reasons, the society has not been able to increase the maintenance charges until now.
In the same neighbourhood, Ashish Co-operative Housing Society, which is barely being able to meet its ends, is being constantly approached by contractors, as they owe around ₹2.5 lakh for elevator repairs.
The society has another operational account with a private bank, but its maximum chunk of ₹14 lakh is locked up at PMC Bank. “Our electricity and water connections are also at stake. As the bank was put under restrictions on September 23, we are barely able to foot the bill for so many months. I just paid the water bill for October, worth ₹51,000, a few days ago,” said Jasbir Singh, society secretary.
The society hiked the maintenance charges by ₹1,000 per month, helping it earn an additional revenue of around ₹40,000. It was also forced to not pay Diwali bonus to housekeeping staff, owing to cap in withdrawals. “We may have to increase the monthly maintenance charges further by ₹2,000, if the bank does not come out of crisis soon, as we have to pay for basic necessities such as water and electricity bills,” Singh added.