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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.
The Enforcement Directorate has filed a money laundering case in the PMC Bank scam.
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.