The Punjab and Maharashtra Co-operative Bank (PMC Bank) was a multi-state urban cooperative bank that began operations in 1984 and was registered under the Cooperative Societies Act. It was regulated by the Reserve Bank of India (RBI) and was conferred the status of a scheduled bank in 2000. The bank's collapse was triggered by a major financial irregularity that came to light in September 2019, when the RBI imposed operational restrictions under sub-section (1) of Section 35A of the Banking Regulation Act of 1949.
The problem that led to its downfall was the failure of internal control and the misrepresentation of financial statements to conceal massive loan exposure to a single entity, Housing Development and Infrastructure Limited (HDIL), and its group companies. The bank had extended loans worth approximately ₹6,226 crore to HDIL, which was about 73% of its total loan book, a figure far exceeding regulatory limits. The bank's reported Non-Performing Asset (NPA) ratio of 2.19% in 2019 was found to be grossly understated, with the actual NPA later estimated to be around 77%.
The crisis led to a resolution mechanism where the bank was merged with Unity Small Finance Bank Ltd. (USFB), a new small finance bank promoted by Centrum Financial Services and Resilient Innovations. The merger was sanctioned by the Central Government and came into effect on January 25, 2022, with all branches of PMC Bank functioning as branches of USFB. This resolution, which was upheld by the Bombay High Court and the Supreme Court, involved the takeover of PMC Bank's assets and liabilities by USFB and a phased repayment mechanism for depositors with balances exceeding ₹5 lakh. The PMC Bank fiasco is connected to the subsequent enactment of the Banking Regulation (Amendment) Act, 2020, which strengthened the RBI's regulatory powers over cooperative banks.