PMC Bank doesn't pose a systemic threat but it is a canary in the coal mine

Given the extent of current nervousness in the financial system, it would be a bad idea to let this problem linger for even six months

Just when you think banks in India can’t possibly deliver any more bad news, a near $1 billion scandal drops without warning.The alleged wrongdoing at Punjab & Maharashtra Co-operative Bank differs from previous Indian banking scams in that savers are on the hook this time around, a situation that can’t be allowed to continue without chilling consequences for an already-stressed financial system.

The problem at PMC Bank only became apparent when the Reserve Bank of India last week banned depositors from taking out more than Rs 1,000 for six months without offering any explanation. That was a mistake. 

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