Days after fraud involving PMC Bank came to light, it now transpires that the rot was deep and the management hid it from the regulator RBI to save its reputation.
The bank even opened a number of dummy accounts to replace the stressed accounts held by Wadhawans-led Housing Development and Infrastructure Limited (HDIL). In a letter to Reserve Bank of India (RBI), the tainted bank’s now-suspended managing director Joy Thomas admitted large-scale wrong-doings and the cover-up exercise.
“Some of the large accounts were not reported to RBI from 2008 because of fear of reputational risk,” Thomas has revealed in his four-page letter.
He said that in 2011, the size of the bank was around 57 branches, with deposits of Rs 2,824 crore and advances of Rs 2,000 crore. The exposure of HDIL group was then Rs 1,026 crore. “Had we classified then as a non-performing asset, we would have to stop charging interest on these accounts and we could have made losses. The growth part of the bank would have got hampered.”
Thomas, however, said that the bank is still optimistic about the repayment plan of HDIL group and the group always promised to clear the dues and gave backup security to back their loans. The letter further said: “Every year during the course of RBI inspection we undergo a lot of stress due to concealment of information from RBI. It was worrying each of us.”
Last week, the RBI barred the Punjab & Maharashtra Cooperative Bank Ltd (PMC), Mumbai from carrying out the majority of its routine business transactions for a period of six months, sparking panic among the depositors and sending shock-waves in the city banking and business circles on Tuesday.
Thomas, who was then the MD, said the bank had been put under regulatory restrictions by RBI owing to irregularities disclosed to the apex bank