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Govt weighs stricter laws to curb frauds in co-operative banks
Nirmala Sitharaman | Photo Credit: Reuters

The India government is considering amending laws to curb malpractices at co-operative banks in Asia’s third-largest economy, following allegations of fraud in Punjab and Maharashtra Co-operative Bank (PMC), Finance Minister Nirmala Sitharaman said on Thursday.

The government has asked its economic affairs and banking division to study the activities of multi-state cooperative banks such as the PMC, Sitharaman said.

She also plans to meet the Reserve Bank of India (RBI) Governor Shaktikanta Das later in the day to discuss a faster resolution plan for the PMC.

Bank officials on Tuesday had accused PMC Bank’s management of concealing non-performing assets and disbursing loans leading to a loss of at least 43.55 billion rupees ($617 million), adding that the bank camouflaged its financials.

The PMC case has sparked renewed concerns about India’s banking sector, which has been rocked by a multi-billion dollar fraud at a state-run lender, the collapse of a major infrastructure lender, bad loan issues at state-run banks and a liquidity squeeze that has hit shadow lenders.

More than two dozen co-operative banks are now under the RBI administration, but PMC Bank - with deposits of 116.2 billion rupees as of March 31 - is by far the largest.

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