Speaking to reporters, Thomas said that PMC has had a banking relationship with the group since 1989-1990, but the loan amount grew over the last six-seven years, and it was not reported to the central bank. Thomas denied that there was external pressure on him or the bank to grant these loans.
“I am not going to tell you how it (HDIL’s exposure) got hidden; it is that they have not seen," said Thomas.
When asked about the reason for underreporting of these loans, Thomas said PMC Bank wanted to grow fast and reporting the exposure could have led to a run on the bank. “We thought that if there was a run on the bank then the depositors, employees will face a lot of problem," he added.
According to Thomas, the exposure was not reported during the last six-seven years and the management came clean to the RBI on 19 September during a meeting with RBI executive director Rabi Mishra. The management, he said, apprised him of the situation and sought additional time to regularize the account.
“We sought time for a resolution plan and the executive director had agreed that they will conduct a normal inspection, which was due. Mishra had told us that normally during inspection, banks get two months’ time till it carries on and we also thought we had time," he added.
The next day, he said, the RBI’s inspecting officers came and collected all the information and on 23 September evening, the central bank issued the restrictions.
“The regulator took a stricter decision, which has caused a lot of harm to the depositors, which we could have managed in a better way," he said.
Thomas said the bank also sanctioned a loan of ₹96.5 crore to the group so that they could repay Bank of India (BoI) and avoid bankruptcy proceedings. He added that this loan was, however, not sanctioned by the board of directors of the cooperative bank.
BoI was among the lenders that initiated bankruptcy proceedings against HDIL before the Mumbai bench of the National Company Law Tribunal (NCLT) last year.
However, the two parties arrived at a settlement in September 2018, under which the builder agreed to repay the bank in instalments and clear all dues by August 2019. Subsequently, the bank withdrew the bankruptcy proceedings. However, HDIL could not meet the deadline and, on 20 August, the Mumbai bench of the NCLT admitted BoI’s fresh insolvency petition against HDIL for failing to repay ₹522.3 crore.
“The exposure which we have reported was to HDIL group, which although, has a delay in repayment and the classification is wrong, is backed by almost 200% of the outstanding (security) and interest with our bank," he said.
On 24 September, RBI put severe curbs on PMC Bank, including on cash withdrawals, amid a probe into accounting lapses. Cash withdrawals were capped at ₹1,000 per account for six months, but later relaxed to ₹10,000, as panic spread among depositors.
Thomas claimed he has heard that RBI might increase the deposit withdrawal limit to ₹1 lakh.
PMC Bank has also been barred from making fresh loans or accepting deposits. The restrictions under Section 35A of the Banking Regulation Act are aimed at preventing a run on the bank.
As on 31 March, the Mumbai-based bank had deposits of ₹11,617.34 crore and loans of ₹8,383.33 crore. While the bank’s gross bad loans, according to its FY19 annual report, were at 3.76% of its advances, it is believed that the figure is much higher.
The multistate scheduled urban cooperative bank has a network of 137 branches, with presence in Maharashtra, Delhi, Karnataka, Goa, Gujarat, Andhra Pradesh and Madhya Pradesh.