Amount worth more than 5% of total deposits was taken out on some days
Mumbai Police has filed a case against the management of PMC Bank and the promoters of HDIL
Mumbai: Large withdrawals of deposits from Punjab & Maharashtra Co-operative Bank (PMC Bank) in a span of two-three days forced the Reserve Bank of India (RBI) to put curbs on the troubled bank, according to a person aware of the matter.
These withdrawals, which started on 19 September, amounted to more than 5% of total deposits on some days, the person said on condition of anonymity.
These large-scale withdrawals, coupled with news of a build-up in non-performing assets and attendant capital erosion, prompted the central bank to step in and place restrictions on 23 September.
The identity of the depositor (or depositors) withdrawing large sums or the exact quantum of deposits withdrawn during this period could not be ascertained and will be disclosed once the central bank completes its inspection. PMC Bank’s total deposit base stood at over ₹11,500 crore at the end of 31 March.
“Financial irregularities including deposit erosion beyond a certain level would trigger directions being imposed on banks," said the same person.
Last week, RBI allowed depositors to withdraw as much as ₹10,000 from their accounts, after initially saying they could withdraw only up to ₹1,000. The new limit will allow 60% of the bank’s depositors to withdraw all of their money.
On Sunday, citing a letter written by PMC Bank’s suspended managing director and chief executive officer Joy Thomas, news agency PTI reported that the bank’s actual exposure to the bankrupt real estate developer is over ₹6,500 crore—four times the regulatory cap or a whopping 73% of its entire assets of ₹8,880 crore.
The letter said the cooperative bank was using fictitious accounts to evade RBI’s regulatory scrutiny during its annual inspection.
“The stressed legacy accounts belonging to this group were replaced with dummy accounts to match the outstanding balances in the balance sheet. As the loans were mentioned as loans against deposits and were of lower amounts, they were never checked by RBI," said the letter, which was partly reviewed by Mint.
The admission came after a board member leaked the actual balance sheet details to RBI, the person added. The whistle-blower approached the regulator and provided information about financial irregularities and the real estate company’s loans not being classified as non-performing since the last two-three years, despite defaults on repayments.
Thomas wrote a four-and-a-half page letter to the regulator giving details of how he, along with six others, including a few board members and chairman Waryam Singh, were sanctioning loans to HDIL.
Thomas said in his letter that these large accounts missed the notice of statutory auditors as they were checking only for incremental advances and scrutinized only those accounts, which were shown to them.
In a press conference last week, Thomas said the bank’s exposure to HDIL and its related entities was to the tune of ₹2,500 crore and that there was a delay in repayments by the group since the last two-three years.
According to Thomas, the exposure was not reported during the past six-seven years and the management came clean to RBI on 19 September during a meeting with RBI executive director Rabi Mishra.
Thomas also said the bank sanctioned a loan of ₹96.5 crore to the group so that they could repay Bank of India and avoid bankruptcy. He added that this loan was, however, not approved by the board of the cooperative bank.
The Mumbai Police on Monday filed a case against the ousted management of PMC Bank and the promoters of HDIL.
The economic offences wing of the police registered a case on charges of forgery, cheating and criminal conspiracy. A special investigation team will probe the case, it said.