Punjab and Maharashtra Cooperative Bank (PMC Bank) has
been facing regulatory actions and investigation over alleged
irregularities in certain loan accounts. Loans given to financially
stressed real estate player Housing Development &
Infrastructure (HDIL) are at the centre of the investigation.
The crisis at PMC Bank first came to light on September 24,
2019, the day the Reserve Bank of India (RBI) placed curbs on
the activities of the Mumbai-based bank for six months. The
central bank also limited the amount a customer could
withdraw from their account during the next six months — to Rs
1,000 at first, and later to Rs 25,000.
About PMC Bank
Founded in 1984, PMC Bank has 137 branches across seven
states, 81 of these in Mumbai, Navi Mumbai, Thane and
Palghar regions, 10 in Pune and 12 in the rest of Maharashtra.
Its customers include small businesses, housing societies and
institutions.
What happened at PMC Bank?
According to an FIR filed in the case, HDIL promoters allegedly
colluded with the bank management to draw loans from the
bank's Bhandup branch. The bank officials did not classify
these loans as non-performing advances, despite non-payment.
Reports estimate the bank’s overall exposure to the HDIL group
at around Rs 6,500 crore, or over 73 per cent of all of the bank’s
advances — and all of this is not being serviced.
The bank also allegedly created fictitious accounts of
companies which borrowed small sums of money, and created
fake reports to hide from regulatory supervision.
In 2018-19, the bank had reported a net profit of Rs 99.69 crore
in its annual report. The bank showed 3.76 per cent (or Rs 315
crore) of advances (Rs 8,383 crore) as gross non-performing
assets (NPAs), which was good performance as compared to
public-sector banks.
However, it is now clear that the bank presented false financial
reports to hide the bad loan mess and the alleged collusion
with HDIL and other companies.
Investigation so far
A special investigation team of the Mumbai Police is probing
the case. The police's Economic Offences Wing registered a
case against the former bank management and promoters of
HDIL on September 30, 2019. The case for forgery, cheating
and criminal conspiracy was filed on the basis of a complaint
by RBI-appointed administrator.
The bank's former chairman Waryam Singh, managing director
Joy Thomas and other senior officials, along with HDIL’s
executive chairman Rakesh Kumar Wadhawan and his son
Sarang, have been named in the FIR.
Most people named in the FIR have been arrested. The bank's
former MD Joy Thomas and HDIL’s Wadhawans were arrested
before him.
PMC BANK CRISIS NEWS
RBI extends curbs on PMC Bank by 3 months as it works on
revival plan
RBI extends regulatory restrictions on PMC Bank by 3 months
till June
Double trouble: PMC Bank asked to deduct TDS on notional
interest paid
SC stays Bombay HC order to sell HDIL assets and repay PMC
bank dues
RBI inspection report of scam-hit PMC Bank yet to be finalised:
RTI
PMC Bank crisis: Administrator to seek valuation of HDIL's
aircraft, yacht
PMC Bank money-laundering case: ED files chargesheet
against HDIL promoters
PMC Bank depositors detained for protesting outside CM
Thackeray's house
PMC Bank case: Depositors protest as HC refuses to interfere
with RBI order
How this affected normal people
On 20 September, 2019, Raunak Modi deposited all his money – and
that of his family’s – in an account they held in PMC bank.
The bank was offering higher interest rates on fixed deposits, which
is a popular saving instrument.
The money he deposited in PMC bank also included a large amount
he got after selling his house in Mumbai. Raunak, 24, was planning to
set up a business to secure a bright future for his wife and his child.
But three days later, his life turned upside down. He was home,
watching the news when he learnt that India's central bank had
frozen PMC's accounts - the bank's managers had allegedly
committed fraud by hiding a pile of bad loans, amounting to
about 65bn rupees ($880m).
He rushed to the bank and joined hundreds of other depositors
who had begun gathering outside PMC bank's branches across
the country to withdraw money. A year on, the bank's
depositors - more than 900,000 people from middle and
working-class families - are still waiting for their money to be
returned.
Raunak was one of them. He killed himself earlier that month.
