You might have read a lot on PMC bank debacle (including some of my articles on PMC Bank and DICGC) in the last couple of days. The communication to Governor RBI (I termed it as ‘an open letter’) write up and commentary will speak of the reality, the current state of affairs.
The risk of losing money is more not only in Cooperative Banking Sector but also in respect of old private sector banks, PSU banks, foreign banks.
There is a need to understand this reality for every depositor and to educate the young generation of this scenario (outlined with the help of scary example).
I am sure that the time you be spending on reading this write-up would be fruitful. I know the article is a legal entity but reality cannot be presented in short. One may not miss the letter addressed to RBI just below the opening remarks.
Please do share your views. I thank you for your time.
My observations/comments on the matter referred in an open letter (this however was not part of an open letter to Governor, RBI):
I know it is not worth to spend time in writing this couple of paragraphs written with utmost sincerity on this matter as neither the Banking Regulator the nor government is going to take this matter seriously and to go to the root of this debacle and rectify.
I also know that neither e-media nor print media would publish this reality for varied reasons. One must remember that one can be in this boat of losers, sometime later in their life and suffer on account of such attitude. I even doubt the websites on which it is being published or readers to whom this communication is being sent, would be read it carefully.
The feeling of helplessness and anguish has prompted me to pen these few lines for those who wish to understand the facts and the risks they are facing from this system, which is not committed to its role.
Also, senior people like me, who have limited life span, prefer to take the matter to court and wait for years (with a bleak hope to get results for losers). Being little technical matter, Judiciary also may need of amicus-curiae or external agency or assistance of regulator to direct rectification of what is being done.
The affected common public may not even realize what he lost on account of lack of subject /professional knowledge and ignorance. Such people may not be live to verify the correctness of DICGC claim settled amount.
I have however made little effort public aware of what is happening in this world of finance and get them as well as next-generation updated and put a pressure on the system to take corrective steps to rectify this sort of happenings before this disease of doing the jobs for salary & not with a motive of service spreads.
The only text of WhatsApp chat is shared (without a name or mobile number of the concerned) as the intention was not to find fault with an individual but to highlight the reality and how casually the things are taken by the persons who ought not to have taken their job so lightly. It is not the lack of knowledge alone or non-availability of sources to acquire the proper knowledge to shoulder the public responsibility, properly it is sheer carelessness with which the system is run by people (who are expected to be diligent in doing their functions in the public interest).
Many of readers are aware that there are huge funds lying at the disposal of the RBI for depositors’ education (which are actually unclaimed deposits over 10 years lying with the banks kept with RBI for administrative reasons). I wonder why RBI does not use this money to teach the depositors/investors using new and different channels on DICG cover how best one can use the present limit Even DICGC in public interest could take up this mission, Banks themselves can give publicity to the FAQ 10 (cited above) appropriately. Making bank depositor aware and guide them properly will not amount to manipulating the position. Letting the public know legitimate ways can be well within the scope of the banking regulator.
Teaching depositors on deposit insurance could be one aspect also training to the Reserve Bank of India officials who are on deputation to DICGC and also to DICGC core staff who is likely to do the job of processing the claims submitted by the official liquidator of de-licensed banks for years to come so that depositors would not lose the legitimate amounts.
One more thing: DICGC also earns DICGC premium from banks that under directions u/s 35A, for many years, till the bank in the subject is liquidated. Let us consider the example of Rupee Bank (under directions since the year 2013). Last 6 years bank must be paying DICGC premium on all liabilities, paying staff salaries, rent, lighting etc. obviously all this is going to be sourced out of funds otherwise would have gone to depositors kitty.
Last but not the least had there been a mechanism of auditing the sanctioned claim with raw data and proper guidance to the team through properly trained officials, instances of depositors loosing-out could be minimal.
Shivaprasad Laxman Chhatre
Sent: 20 October 2019 22:31
Subject: DICGC claims on behalf of depositors of MMCB –serious observations- Public interest matter- urgent attention required
From: Shivaprasad Laxman Chhatre, Bavdhan, Pune
To Governor, Reserve Bank of India, Mumbai
Re: DICGC claim on behalf of depositors of MMCB –serious observation- Public interest matter
Note: The matter under reference is serious and requires the careful attention of seniors hence this communication is addressed to you.
I focus on public interest matters and help members of the public in addressing their banking and finance-related grievances (as social work). In the recent past, I have shared some write-ups on coop bank matters.
I wish to share part of one such communication on PMC (Cooperative) Bank (Annexure-I) which is about how to legitimately maximize DICGC cover, in the current situation. In this annexure have sounded legitimate ways to the bank depositors how to use best out of the current DICGC cover available to them, by using a provision as outlined in official DICGC-FAQ booklet (FAQ 10)
Under FAQ 10, there is a mention about deposit held in the same capacity and same right and deposits held in a different capacity and different right. I have circulated ways of how one can do it. The advice given therein was supported by a legitimate supporting link to the official website of DICGC (all this information was published on many websites this was also circulated through a private circulation on WhatsApp group).
On reading one of my write-up* see annexure-1 under private circulation one, just retired, a senior official from RBI texted me stating that she had long experience in working in DICGC, in claim settlement and she had settled Madhavpura Mercantile Coop Bank (MMCB) claim.
The text of conversation starts with an observation that the example given in the article (see the text marked as an annexure, at the end of this write-up) is not correct and that the coverage eligible is aggregate of Rs.1,00,000 for any depositor either singly or jointly. After the required proof was provided the ex-official went on back foot and tried to cover up the lapses of RBI / DICGC blaming the ‘official liquidator’, it’s untrained supporting staff, role of State Government /Central Govt (depending on whether it is single or multi-state coop bank) and external agencies hired in for preparing the claim (there Incompetence) and in a way concurred with my fear there could be many eligible claims not paid because of the lack of understanding of the subject by all the concerned.
I share the text on this matter on WhatsApp, with no modification, with you. Ultimately lady concerned pushed the blame of wrong settlement of claims in this case to the state government/central govt appointed, less knowledgeable official liquidator, and improper support they get from external agency hired for preparation of claims etc.
I do not think it is necessary for me to mention that if the claims are submitted incorrectly without considering the correct eligibility and if are not scrutinized with the raw data by DICGC officials, customer/s who already suffered a long time till settlement will lose on the claim. The vulnerable customer will not even understand that he lost due to the fault of the official liquidator or the agency hired by official liquidator or fault of DICGC. This situation is scary.
I do not know what will happen to Punjab Maharashtra Co-operative Bank and or other cooperative banks that are currently and the directions of RBI u/s 35A of RBI Act but the factor that was clearly observed in the WhatsApp dialogue needs to be looked at carefully. This communication is specifically to share with you to highlight how scary situation.
Many customers, who have joint accounts and had placed many deposits in different name combination can expect the claim amount as stated in the example. However, if official liquidator & DICGC do not know and bother to follow the guidelines as stated in FAQ 10 (in attachment) claimant will get a paltry amount of Rs 1 lacs against the actual eligibility.
I request you to direct this mail to the concerned person of DCBR and/or DICGC so that this may not happen, to other cases in future, and RBI really cares corrective steps can be taken in case of Madhvpura Mercantile Coop Bank Ltd (MMCB).
I believe the referee (RBI/DICGC) have to follow the law of the land and have no authority to change the rules of the game itself. Even if the rules are to be changed it is after proper intimation and time given to bank depositors and after following the proper process. It cannot be done arbitrarily and that too retrospectively.
I am afraid this is the communications may do not reach the concerned and will get tossed between different departments of RBI infinitely as in many other cases. Please note that RBI’s first job is to protect depositors interest and banking system of the country runs on sound lines.
Text of scary Whatsapp Chat
[20:30, 10/16/2019*] +91 77387 xxxxx: DICGC एक लाखापेक्षा जास्त देऊ शकत नाही. आणि वर सांगितल्याप्रमाणे जॉइन्ट accounts by different order केल्यास चार लोकांच्या फॅमिली che वीस लाख insure होऊ शकतात. (meaning in the manner I stated in a family of four example 20 lacs could get insured, however in that case DICGC cannot give more than one lac)
[20:30, 10/16/2019] +91 77387 xxxxx: A, B, C, D, AB, BA, AC, CA, AD, DA, BC, CB, CD, DC, ABC, ACB, BAC, CAB, ABD, ADB, BCD, BDC, ABCD, ACBD, ADBC….. AND SO ON, MORE than 20 lakh.
[20:30, 10/16/2019] +91 77387 xxxxx: एक लाखाहून जास्त रक्कम Liquidator देऊ शकतो, पण DICGC ne दिलेली रक्कम DICGC la parat दिल्यावर. DICGC चा त्या साठी (एक लाख हून जास्त) काही संबंधच नाही. (meaning in the process of settlement only official liquidator can give more than 1 lacs but DICGC has nothing to do over Rs. 1lac).
[20:30, 10/16/2019] +91 77387 xxxxx: आणि liquidation प्रक्रिया सरकार (राज्य) kinva multi state Bank sathi केंद्र सरकार करते. RBI/ DICGC नाही.( (meaning liquidation process is done by state or central Govt, in case of Multi state coop Bank)
[20:32, 10/16/2019] +91 77387 xxxxx: आणि MMCBL चा claim मी स्वतः settle केला आहे. (meaning I have settled the claim of MMCB)
[20:33, 10/16/2019] +91 77387 xxxxx: mob.no. ————— (hidden)
[20:33, 10/16/2019] +91 77387 xxxxx: Name—— (hidden)
[00:11, 10/17/2019] Shivaprasad Chhatre: I have shared the official link which takes you to DICGC website wherein example I have given can be clearly seen and understood. I had reverified on DICGC site two days ago. It clearly states what I had restarted. For coop, bank rule cannot be and is not different. The contract is with the insurer (DICGC) and has to be and is transparent. We can speak on this tomorrow.
[00:15, 10/17/2019] Shivaprasad Chhatre: Claims are always lodged by official liquidator who is appointed after the central government and RBI, in this case, decide to liquidate the PMC Bank (as PMC Bank is a Multi-State Bank, Central Registrar of cooperative societies concurrence is taken by RBI while de-licensing the bank).
[00:19, 10/17/2019] Shivaprasad Chhatre: If the claim lodgment is faulty it is not the fault of dicgc it is the fault of the liquidator. Liquidator ought to have corrected the mistake and should have resubmitted the claim which fits as per the norms of DICGC. The situation stated by you is scary and needs to be probed for the benefit of people who lost it.
[00:25, 10/17/2019] Shivaprasad Chhatre: If claim lodged is for the single case instead of multiple eligible cases of case customer in the different right, in my view, it is the fault of the liquidator and the poor depositors lost the benefit due to the lack of or proper information knowledge of the official liquidator. Had it been noticed dicgc should have given the additional amount in eligible cases or changed the rule and example in its FAQ prospectively and not retrospectively. Even now dicgc should pay to these gullible depositors. If I would have been there i would have taken the system to task as I have done in many other cases.
[00:27, 10/17/2019] Shivaprasad Chhatre: https://www.dicgc.org.in/FD_FAQs.html
[00:30, 10/17/2019] Shivaprasad Chhatre: Please peruse detailed answer to question 10 by DICGC in its FAQ. It should clarify DICGCs position. In my view if official liquidator did not know this what will happen to society, i wonder. If any additional info comes in please let me know.
[07:15, 10/17/2019] +91 77387 xxxxx: Thanks Sir.
[09:00, 10/17/2019] Shivaprasad Chhatre: I hope I did not heart u or anyone with my observations and document sent. I also. know that you did with proper intention. I wanted to clarify that what I wrote was totally in sync with the current official position of DICGC and that I have not miscommunicated.
[12:43, 10/17/2019]: +91 77387 xxxxx: The fact is the liquidators are state government employees who have other additional duties also. They are issued guidelines regarding the preparation of claims. But majority of liquidators do not understand anything about it and are fully dependent on the bank staff/external agency appointed for claim preparation.
[12:43, 10/17/2019]: +91 77387 xxxxx: DICGC used to conduct workshops for them, (it was started during my tenure there). But the liquidators used to bring the agency person as they themselves are not much familiar with the banking terms/business.
[12:58, 10/17/2019] Shivaprasad Chhatre: we can therefore, conclude that due to their lack of knowledge and skill sets /training and not scrutinizing the claims with actual data buy DICGC results in bonafide customers losing the claim amount (actually eligible), as it would have certainly happened (going by the discussion) on this matter, in madhavpura mercantile Cooperative Bank case. The burnt will be the depositor. Is it not scary? If u r wife is here and was interested i could have spoken about my public interest matter /concern.
Note: You may notice there is a contradiction in-text ‘ shown in Bold and text in italics and underlined & (in between, my communication exists with my name appearing alongside).
If I do rely on the facts stated herein I would conclude that many depositors who qualified for reimbursement were paid the paltry amount due to lack of knowledge. Does RBI expect the depositors / their heirs (some cases actual depositors of MMCB might have been dead) should know more than RBI officials (on deputation of DICGC) and be also responsible to settle these claims? One may wonder why not DICGC has an independent and good setup with trained staff for processing claims, audit, training etc).
Please peruse text of the case that was responsible for these facts to come out – Annexure- I (given below) to get to know the insight.
How to get maximum Deposit Insurance (DICGC) Cover from deposits with a single bank Or How one may enhance DICGC cover for existing deposits over Rs.1 lac with ‘the Bank’
If a set of family members wish to keep money in smaller banks (including licensed but non-scheduled cooperative bank and Scheduled Cooperative Bank), licensed small finance banks (including one yet to receive scheduled status) for a higher rate of interest yet wished it to be secured / safe, such people may consider following.
Using legitimate trick below you may invest in weak PSU bank or in a co-op bank ” or “Small Finance Bank” that may be offering higher interest returns. I have purposefully not mentioned the name of payment banks as currently one cannot invest more than 1 lac in ‘CASA’ deposit with such banks and one cannot deposit money with them in Fixed Deposit.
Please peruse page 8-9 (official reply of DICGC with an example, to a query No: 11) from DICGC booklet (extract given below). Only a few depositors (even members from bankers community) know this aspect.
Q 11: What is the meaning of ‘deposits held in the same capacity and same right’; and ‘deposits held in a different capacity and different right’?
If an individual opens more than one deposit account in one or more branches of a bank, e.g. Shri S.K. Pandit opens one or more savings/current account and one or more fixed/ recurring deposit accounts etc., all these are considered as accounts held in the same capacity and in the same right. Therefore, the balances in all these accounts are aggregated and the maximum insurance cover is available up to rupees one lakh.
If Shri S.K. Pandit holds other deposit accounts in his capacity as a partner of a firm or guardian of a minor or director of a company or trustee of a trust or a joint account, say with his wife Smt. S. K. Pandit, in one or more branches of the bank then such accounts are considered as held in a different capacity and different right. Accordingly, such deposits accounts will also enjoy the insurance cover up to rupees one lakh separately.
It is further clarified that the deposit held in the name of the proprietary concern where a depositor is a sole proprietor and the deposit held in his individual capacity are aggregated and insurance cover is available up to rupees one lakh in maximum.
However, if individuals open more than one joint accounts in which their names are not in the same order, for example, A, B and C; C, B and A; C, A and B; A, C and B; or group of persons are different say A, B and C and A, B and D etc. then, the deposits held in these joint accounts are considered as held in the different capacity and different right.
Accordingly, insurance cover will be available separately up to rupees one lakh to every such joint account where the names appear in different order or names are different
All such money will be insured with DICGC (100% subsidiary of RBI) if you deposits of money based on the reply to the FAQ: 11 (above) in mind.
To elaborate further:
Say, a senior citizen (‘A’) has the following deposits in the name of self and his family two other members :
‘A’ singly (Rs) 100000,
A &B jointly (Rs) 100000,
A&B&C jointly (Rs) 100000,
A&C&B jointly (Rs) 100000.
In this case A’s deposit (single) as well as 3 deposits of ‘A’ jointly with others (he being the first depositor) each Rs.10000, will entitle an sr citizen rate of interest, Also all deposits held in the names of A+ A&B, A&B&C, A&C&B will be treated as deposits held in different capacity and different right (and DICGC cover of Rs 100000 will be available to each of the above combinations). Thus a person will get DICGC cover for Rs.4 lacs and sr citizen interest rate
Further, if there are many deposits placed with the same bank between A, B and C (combinations of some or all such persons, even if such deposits are held in different/reverse order also) will be treated as deposits held in different capacity and different right and will qualify for separate DICGC cover of Rs 1 lac each, per such combination.
There will be genuine doubt: How one could apply this to existing depositors with any bank.
One can be sure that till the time there are directions from RBI (like in case of PMC bank) or while the bank is under PCA one can legitimately apply to the bank to ‘add’ name of another depositor as a joint depositor. e.g ‘A’ has two deposits say Rs 1 lac and Rs 1.5 lacs respectively.
While ‘A’ may continue to hold any of the deposits (in this case) on his single name, may advise the bank to add the name of ‘B’ as 2nd joint depositor and also make it payable to ‘former or survivor’. Thus the Interest /Tax status of the deposit will not undergo a change but the 2nd deposit that was hitherto not covered for DICGC will qualify for DICGC cover-up to limit of Rs 1 lac (separate from A as sole holder), due to application of rule deposits held in a different capacity and different right’. This cannot be challenged denied as it fits in DICGC norm and perfect as per deposit policy of each bank which is based on model deposit policy of IBA. It is also consistent with RBI’s manual on deposits and old RBI’s master circulars on deposits.
A step further, even if a bank is under direction this ‘addition’ / ‘deletion’ of the name can not be stopped as it is a permissible activity (falling outside the scope of the directions under Sec 35A). The Bank is subject continues to be a licensed bank and is acting on the legitimate instructions of the depositor. Similarly, where two deposits are held in the names of A and B, the joint depositors may approach the bank to delete the name of 1st or 2nd depositor and make it singly held. This addition and deletion of names are perfectly legal so long as the event of liquidation is unknown to both insurer and the bank concerned.
The addition or deletion can also be as a result of the operation of law (settlement of death claim under nomination or survivorship) or otherwise. Applicability of this norm to a split of large deposit of individual/s followed by addition or deletion of name to the deposit/s, post-split, maybe point of specific judgement but legitimacy of earlier two cases cannot be questioned and DICGC cover cannot be denied to the above two cases of deposits modified, provided tenure, amount does not undergo a change.
As a matter of fact, like a time limit set for insolvency and Bankruptcy code there should upper time limit of say 3 years given to cooperative bank under directions like PMC bank (the case should not get dragged for years like Madavpura Mercantile Bank where depositors above Rs 1 lac are yet to be made final settlement. Prolonged settlement of DICGC beyond reasonable time is unjust and does not in any manner reduce the hardship of gullible depositors. RBI needs to decide as a rule maximum time limit to be given to ailing banks (for the banks) to come out of the crises or face insolvency and let the DICGC do the rest.
One must remember that bank under PCA or under directions like PMC bank (who may eventually get liquidated or merged) has to pay DICGC premium for all insurable liabilities for years till the bank’s fate is finally decided by Regulator/Govt and if such period happens to be 5-10 years (like Madhavpura Mercantile Bank Ltd) the DICGC premium eats the money of depositors who are on the verge of losing-out substantial portion.
(Shivaprasad Laxman Chhatre) Bavdhan, Pune
Land: 020 22947152 Cell: 9819380114
Note: All observations above except within ‘quote & Unquote’ are mine and readers may evaluate it on own and invest.