PMC Bank- A Story of Greed and Clueless Regulator

Punjab & Maharashtra Co-operative (PMC) Bank has violated all ethical norms.

PMC Bank- Story of Greed and Corruption while Regulator including RBI and the Auditors are sleeping

It’s a seriously bad time, when it is seen that a Big co-operative bank is using common man’s hard earned money as a deposit. Furthermore, it is utilizing the funds for friends and relatives of the Chairman of the PMC Bank (Punjab and Maharashtra Co-operative Bank) without much security and even without informing Board members also. Who is going to bear this out come? At the max, jail time for the chairman or maybe for some other board members. Who will return this money? How the so called ‘very efficient and effective system’ is failing to detect these serious lapses? It’s a matter of grave concern for the Banking system, Cooperative Banks and Regulators. The person who bears the brunt is ‘Aam Aadmi’, the common man.

The current scenario (as on 1st Oct-2019)

1. Mumbai Police has very recently filed a case against the former Bank Management and Promoters of HDIL (Housing Development and Infrastructure Limited) and PMC Bank’s Director and Chairman. Though the point to be taken into consideration whether a simple FIR is enough to solve the crisis.

2. There is a clearly an established relation between the Chairman of the PMC Bank and HDIL. The Chairman of the bank, Waryam Singh, was on the board of HDIL. Surprisingly PMC did not even disclose the loans given directly to HDIL as related-party transactions. These are some basic governance laws which are mandatory  and applicable. Astonishingly such big loans were sanctioned without proper disclosure and approvals.

3. SIT is now given the charge to probe the case. They will take a minimum of 3 to 4 months to investigate, and by then people who have invested will be affected .

4. HDIL (HDIL promoters allegedly colluded with the bank management to draw loans from the bank’s Bhandup branch) is the main party as the Bank had extended substantial amount of loans to the company about 73 % of its total loan book size of Rs 8,800 crore as of September 19.

5. Bank’s MD Joy Thomas has accepted giving loans to HDIL and its related entity to the tune of Rs 6,500 crore without informing all board members. Although the management has suspended him. The question here is, is he the only one who is guilty?

6. Despite non-payment, the bank officials did not classify the loans as non performing advances and intentionally hid the information about the same from RBI.

7. Another fraudulent activity done to cover was to create fictitious accounts of companies which borrowed small sums of money, and created fake reports of the bank, in order to hide it from the regulatory supervision.  As per the latest reports they had created almost 21,049 dummy accounts and over ten years of misreporting to execute what is probably the biggest case of swindling at any cooperative bank in the country.

8. PMC Bank, which has 137 branches and over Rs 11,000 crore in deposits, has been put under restrictions after the RBI discovered certain financial irregularities. Under the restrictions, a depositor can withdraw only Rs 10,000 per account (which was initially 1,000) for the next six months.

The questions that arise now are:

1. How can this happen where RBI, Society Act regulators, Auditors, Governing Systems and Strong Regulatory exist?

2. Who will pay for this loss? Is the answer going to be ‘the honest taxpayer’s money’?

3. What are the so called highly qualified professional hired for? Do they charge hefty fees for hiding or stopping such issues?

4. When will we wake up as a system?

Summary
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PMC Bank- A Story of Greed and Clueless Regulator
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Punjab and Maharashtra Cooperative (PMC) Bank has violated all ethical norms and has dispersed the public money, received by them as their account balances or deposits, through loans given to Housing Development and Infrastructure Limited (HDIL) promoters and their group companies without adequate security.