Question: Case Study: PMC Bank, which has lately been in the news for fraudulently extending loans to Housing Development & Infrastructure Ltd (HDIL), imperiling deposits of

Case Study: PMC Bank, which has lately been in the news for fraudulently extending loans to Housing Development & Infrastructure Ltd (HDIL), imperiling deposits of numerous customers, is just the latest in a series of cooperative banks that have been placed under restrictions by the RBI. As of March 2019, 26 urban cooperative banks (UCBs) were placed under directions of the central bank for putting depositors at risk, thanks to mismanagement or fraud. PMC Managing Director Joy Thomas has admitted to hoodwinking the auditors, bank’s board and the RBI for many years by concealing the default on loans to the tune of Rs. 6,500 crore taken by real estate firm Housing Development and Infrastructure Ltd (HDIL). This means operations are restricted deposits are stuck lead to chaos among depositors for their hard-earned deposits.

a. What is the various risk faced by banks? Elaborate on how risk management norms (Basel norms for e.g.) being provided by RBI can help to avoid such situations. (5 Marks) ( 350 Words )

b. What are the reasons that such default happened in PMC bank? Do you think this can be avoided if proper risk management has been implemented by the bank or RBI? (5 Marks) ( 350 Words )

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a Various Risks Faced by Banks and Role of Basel Norms 1 Types of Risks Faced by Banks Credit Risk This arises from the possibility that a borrower or counterparty will fail to meet its obligations Ma... View full answer

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