Punjab and Maharashtra Cooperative Bank (PMC Bank), which is now placed under regulatory restrictions for under-reporting its bad loans, had reportedly granted a personal loan of Rs 96.5 crore to debt-laden realty company Housing Development and Infrastructure’s (HDIL) promoter Sarang Wadhawan, whose company had already defaulted on a Rs 2,500-crore loan given by the lender.
Throwing all rules to the wind, PMC Bank had sanctioned the personal loan in August and it was over and above the Rs 2,500-crore loan that HDIL had ceased repaying, and which the cooperative bank failed to classify as bad loans. Alarmingly, PMC Bank kept dealing with the beleaguered company even when it was facing insolvency proceedings in the National Company Law Tribunal (NCLT).
Earlier, news reports mentioned that just one account — HDIL — was the single reason for the PMC Bank’s woes, which was subsequently acknowledged by the bank’s managing director, Joy Thomas. Wadhawan and HDIL took loans from PMC Bank to clear Bank of India’s (BoI’s) dues, which had initiated bankruptcy proceedings against the company for allegedly defaulting on loans of around Rs 520 crore.
BoI had approached the NCLT against HDIL last August but withdrew the pleas after it reached a settlement with the embattled company to resolve the issue. The bank submitted a fresh petition against HDIL in the tribunal after the company couldn’t meet the August 2019 deadline to settle the account, a Mumbai-based publication said.
State-controlled BoI in August had said that it was dropping the bankruptcy proceedings against HDIL for 14 days weeks after it got two pay orders worth Rs 96.5 crore from the company. The bank acknowledged receipt of two PMC Bank pay-orders totaling Rs 96.50 crore.
More importantly, S Waryam Singh, chairman of PMC Bank, held 1.91 per cent stake in HDIL till September 2017. In 2005, he joined the HDIL board as a director, and resigned to re-join the cooperative bank as chairman in 2015, a post he had held between 1999 and 2005. Furthermore, Singh was a non-executive director at HDIL, he is listed as one of the promoters of the company and had dealings with several other entities managed by the Wadhawans, the HDIL founders. He was a director on the bank during his stint at HDIL, according to a report in a business daily.
PMC Bank’s loan to HDIL has come under the scanner of the banking regulator. The bank’s auditor is said to have classified the loan to the troubled company as standard while the central bank had highlighted it as a stressed account, making it mandatory for the bank to treat it as toxic loan.
The Reserve Bank of India (RBI) clamped down on PMC as it found the bank had under-reported bad loans during its annual inspection and that the actual non-performing assets (NPAs) could be in high double-digits. PMC Bank, based in Sion in Mumbai, has a network of 137 branches in seven states, surrounding Maharashtra, Goa, Delhi, Karnataka, Gujarat, Andhra Pradesh and Madhya Pradesh.
On Thursday, providing relief to the customers of the crisis-hit PMC Bank, the RBI raised increased the withdrawal limit from Rs 1,000 to Rs 10,000.
“Other terms and conditions of the said Directive shall remain unchanged. With the above relaxation, more than 60 percent of the depositors of the Bank will be able to withdraw their entire account balance,” RBI said in a statement.
“The above relaxation has been granted with a view to reducing the hardship of the depositors. The Reserve Bank is closely monitoring the position and shall continue to take further steps as are necessary to safeguard the interest of the depositors of the bank,” RBI said.
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