MUMBAI: The beginning of financial fraud at the Punjab and Maharashtra Cooperative (PMC) Bank could date as far back as 2008, with officials at the lender allegedly creating several accounts to help fund the distressed property company HDIL over the past decade, two people familiar with the matter told ET.It has now come to the knowledge of the Reserve Bank of India (RBI) that a group of management executives, which included the now suspended managing director (MD) Joy Thomas, allegedly helped lend about Rs 6,226 crore, or 73% of total loans of the bank, to just HDIL. The developer has filed for bankruptcy recently.“It is shocking to know that more than two-thirds of the total loans of the bank went to just one customer,’’ said one of the sources cited above. The fraud may have begun in 2008 and is “going on since then,” said the source.71361873 Neither RBI officials nor Thomas could be contacted immediately for comments.Although the chairman of the bank, Waryam Singh, was on the board of HDIL, PMC did not even disclose the loans given directly to HDIL as related-party transactions. This is a grave violation of banking laws, said the sources.“The RBI, a few years ago, forced the bank to move to the electronic platform and digitize a lot of processes,” said the second source. “With that, the bank was unable to continue this game for long and now the management is pretending to be a victim than the perpetrator.’’ The regulator is likely to begin criminal proceedings against the suspended MD and several other bank executives, including some board members. A complaint could be filed at the Economic Offences Wing of the Maharashtra police as early as Monday.A person familiar with the case confirmed that RBI had sought the removal of PMC chairman Singh for breach of corporate governance norms.“At the end of the last RBI inspection in October last year, RBI had asked the central registrar of societies to remove Singh from the bank's post because he was involved in the bank while still serving as a director in HDIL. However, the central registrar never acted on the request and, in fact, Singh continued to be chairman until the RBI put directions on the bank,” said the person.As a multi-state co-operative bank, PMC came under the control of the central registrar. So, central bank action on PMC first needed the regulator’s nod.Over Two-thirds of PMC’s Exposure is in HDIL GroupThe Mumbai–based cooperative bank, with operations in seven states, collapsed recently and the RBI ordered freezing of operations and imposed limits on withdrawals of funds by depositors. It raised the limit to ?10,000 per account from ?1,000. The central bank also appointed former regulator J.B. Bhoria as administrator.On Friday, Thomas had said the central bank was rather harsh and hasty in taking punitive action against the lender without giving it an opportunity to recover loans advanced to HDIL.Thomas had said the bank had enough securities to cover its loans to HDIL, and the regulator should have allowed the bank more time in recovering its loans.“We met the RBI executive director (ED) Rabi Mishra on September 19 and gave him details about this account and asked for some time to rectify it. The ED said he will conduct a normal inspection on the bank. The next day, RBI officials came and took more information from us. But we were shocked when we got the notice with restrictions on the 23rd…How can the RBI find out what is wrong in two days? This has resulted in depositors facing difficulty despite the fact that the bank had sufficient liquidity,” Thomas had said Friday.“I cannot say how this exposure was hidden but I can only say that this exposure was not seen until now…but we had collateral securities totaling about two and a half times the loan exposure to this group in the form of land and real estate,” he had said last week.PMC gave a fresh Rs 96-crore loan to HDIL in August to help the company pay off Bank of India and avoid NCLT proceedings.
from Economic Times https://ift.tt/2m8Snwf
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