It’s been in the news for a while that Punjab and Maharashtra Co-operative Bank (PMC Bank) crisis left lakhs of depositors unable to access their lifetime’s savings.
The incidence shook the confidence of many banking customers and created anxiety among many depositors. The rumors regarding other banks, including co-operative banks started to spread so much that RBI had to step-in and ensure public that Indian banking system is safe and there is no need to panic.
So, in this article, we will learn what exactly happened in this scam.
In an affidavit filed by Rajlaxmi Sethi (who is an assistant general manager, department of co-operative bank supervision, RBI) before Bombay High court , where RBI virtually admitted that it was cheated by the management of PMC bank. PMC bank had submitted manipulated records, fictitious profit, falsified information of offsite returns, false indent information to the Central bank and RBI inspection team.
RBI inspection team established the link between the S.Waryam Singh and HDIL (Housing development and infrastructure Ltd.) promoters / directors. S.Waryam Singh (who is the chairmen of the bank and also the director of the HDIL) had sanctioned the mortgage limit to wholly subsidiary of HDIL and also chaired the board meeting where mortgage overdraft, in which he was interested, was approved. This is the case of conflict of interest and violation of RBI’s master circulars to the effect of July, 2010 and July 2012.
The connection between S.Waryam Singh and HDIL promoters / directors could have helped promoters / directors to get credit facilities and later pay off in one-time settlement dues with other lenders.
PMC bank has apparently tampered with Management Information System (MIS) and NPC identification process.
In this, Bank had given special access codes to HDIL accounts, with restricted visibility to less than 25 out of actual 1800 staffers. It deliberately excluded HDIL accounts, while running the script of system identification of NPA’s.Thus, these excluded accounts were omitted from the “System generated NPA account report and with Overdrawn Accounts list” too.
PMC bank’s MIS software “Opine” had a script for generating list of newly sanctioned / disbursed accounts. But undisclosed / excluded loan accounts were missing from this list. These irregularities were not highlighted by the Concurrent auditor of PMC bank at the Sion branch.
These undisclosed / excluded accounts were sanctioned and renewed by PMC Bank Managing Director K.Joy Thomas. This action was deliberately excluded from the minutes of Loan committee and Recovery committee and Board of directors meeting.
All the promotes/ directors of HDIL , K.Joy Thomas and S.Waryam Singh is now arrested. RBI suspended bank’s BOD and appointed an administrator to evaluate the securities / collaterals provided by HDIL to auction them to recover the dues.