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Here is today’s editorial which talks about “Punjab and Maharashtra Co-operative Bank issue”. These editorial articles are done on regular basis in order to help aspirants preparing for important government, banking and insurance exams. The English section in these exams is often considered difficult, however in order to enhance the vocabulary of the candidates we regularly publish such articles in which we highlight difficult words and their meanings respectively. This not only aims to help you understand the editorials of prominent publications, but it will even help the candidates in reading comprehension section.

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Trust deficit: On Punjab and Maharashtra Co-operative Bank issue

Failures such as PMC Bank’s must be pre-empted (to do or say something before someone so that you make their words or actions unnecessary) to retain (to keep or continue to have something) public faith in the system

It has been a nightmare of a week for thousands of customers of the Punjab and Maharashtra Co-operative Bank (PMC), who were told last Tuesday by the Reserve Bank of India that no more than ₹1,000 could be withdrawn from their accounts for a period of six months. The 35-year-old lender may not be the first but is certainly one of the largest urban (relating to towns and cities) co-operative banks facing this clampdown (an action taken by a government or an authority to stop or control a particular activity). The resultant (caused by the event just mentioned) distress (feeling of extreme worry or sadness) is also more widespread as the bank, with a large footprint in Maharashtra, is also present in Delhi, Goa, Gujarat, and Karnataka. Strikingly (in a way that is very unusual or easily noticed) there was no ostensible (appearing to be one thing when it is really something else) sign of distress to trigger the bank’s virtual collapse, following the regulator’s intervention (the act of getting involved in a difficult situation intentionally in order to improve it). Things were going swimmingly as per its latest annual report, with deposits growing nearly 17% year-on-year to ₹11,617 crore by March 2019, with long-tenure savings accounting for the largest chunk. Profits, in a tough year for banks, were flat, and while bad loans more than doubled, their proportion was far lower at PMC than at most public sector banks. Given this backdrop (general situation in which particular events happen), the bank’s depositors, who ironically (something that suggest the opposite of what you intend) include the RBI’s own employees’ co-operative, are understandably perturbed (worried) about the fate of their savings. The RBI has said it is acting in depositors’ interests after ‘financial irregularities, failure of internal control and systems of the bank and under-reporting of exposures’ came to its notice and on Thursday, raised the withdrawal limit to ₹10,000 per account, stressing this should allow 60% of its depositors to recover their entire savings. The RBI must still explain what made it increase the withdrawal limit ten-fold within 48 hours, lest it be seen as a politically weighted move ahead of the Maharashtra election.

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Questions have been raised on the bank’s large exposure to Housing Development and Infrastructure Limited (HDIL) which is itself undergoing insolvency (the condition especially of a company of not having enough money to pay debts) proceedings. The bank’s chairman had served on the board of the HDIL for ten years between two long stints at the bank, and any irregularities in loans to the firm would be an indictment of the quality of oversight on banks. That the RBI shares regulatory responsibilities over such banks with States’ Registrar of Co-operative Societies further mires (an unpleasant situation that is difficult to escape) the problem. With over 1,500 urban co-operative banks operating in the country, and a few of them already under RBI-imposed restrictions, a new road map is essential for their future course. Perhaps the only major gain from demonetisation (to officially stop using a particular currency) was the deployment (the use of something, especially in order to achieve a particular effect) of public savings into the formal financial sector. But failures like PMC Bank can quickly erode (to weaken or damage something) that. Time-bound (a task that is restricted by time), transparent action to fix the PMC mess and a systemic (relating to or involving a whole system) overhaul (to repair or improve something so that it works fine) is necessary to prevent cash from moving back below household mattresses.

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We hope that these editorial articles shall help you in achieving success particularly in the English section for major banking, government and insurance exams.


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