PMC Bank loaned Rs 6.5K cr to HDIL, used dummy a/cs

Punjab and Maharashtra Co-operative Bank (PMCB) gave Rs 6,500 crore of loans to cash strapped real estate and infrastructure developer HDIL and group companies through hundreds of dummy borrower accounts, which were not traced in the Reserve Bank of India (RBI) audits, according to a source in the bank.

Some of the money lent was also not reflecting on the books of the bank as the records were not computerised to hide the faulty credit lines.

In a letter to RBI, the now suspended managing director of the bank Joy Thomas has written that the total loans extended to the HDIL are Rs 6,500 crore, which is 73% of the bank's advances.

"He also added in the letter that he is responsible for the transactions and only a few Board members were aware of the credit lines to the cash trapped realtor and construction firm. Now a criminal complaint will be filed against Joy Thomas and the Serious fraud Investigation Office may take over the case," a source said. However, the shareholders of the bank are clamouring for the entire Board's assets to be attached so that the public money can be recouped.

On September 17, a whistleblower – a senior employee of the bank – alerted RBI about the indiscriminate lending to HDIL, which prompted the regulator to place restrictions of the bank after the complaint was corroborated by the managing director in a second letter.

RBI and its administrator are currently conducting an audit into the books of the bank.

"The loans to HDIL were not reflecting in the books of accounts at all. It was diverted to the group through thousands of dummy accounts that were created," said a person close to the development. In 2017, RBI had asked all co-operative banks to computerise their records and bring in Core Banking Solution (CBS) platform, which is also not complied by the bank.

RBI in 2018 had caught a loan of Rs 258 crore which was reclassified as a non-performing asset. The same loan was regularised growing to Rs 450 crore in 2019. "There were umpteen accounts like this where repayment was shown and converted. It was not possible to trace the borrower in each instance as the bank has not computerised its accounts," the source said.

Waryam Singh, the 67-year-old chairman of the bank, owns a company called Akal Finance, which has also borrowed Rs 400 crore from PMC, according to a shareholder who will be accompanying the group to Economic and Offences Wing. Singh held 1.91% in HDIL till September 2017 after which he sold it. Singh, who joined the HDIL board as a director in 2005, quit to return to the bank as chairman in 2015, a position he had held between 1999 and 2005.

A senior officer of the bank, who was the whistleblower in this case, first lodged a complaint with RBI on September 17, and on September 19 the now suspended MD Joy Thomas approached RBI. The entire Board of the bank has sunk the finances of the only Sikh community bank, said a shareholder

The shareholders and the Gurudwara Samiti and Sikh institutions, which have over Rs 400 crore of deposit in the bank will approach the Economic Offences Wing (EOW) to lodge a complaint asking for all the directors' properties to be attached. "This was the only bank of the Sikh community and it has been ruined due to the greed of the Board," lamented a shareholder.

Hundreds of PMCB depositors of Punjab and Maharashtra continued to demand that RBI relax their conditions so that they can have access to their deposits. About 500depositors gathered in the bank's Bhandup and Andheri branches to make their protests heard.