A day after the Mumbai Police detained HDIL (Housing Development & Infrastructure) promoters Rakesh and Sarang Wadhawan, the department arrested Joy Thomas, PMC Bank managing director. These promoters were produced in Mumbai local court and their custody was extended till October 9.
The police also filed FIR about the PMC Bank irregularities. The ED (Enforcement Directorate) registered a criminal case against PMC Bank former chairman S Waryam Singh, former MD Joy Thomas, the Wadhwans of HDIL, and all other entities and officials named in the FIR for money laundering
Thomas is at the center of this scam and he confessed he misled the bank for five years creating over 21,000 dubious accounts to hide the loans given to HDIL, the Mumbai-based realty firm with the assistance of PMC Bank officials. PMC has given Rs 6500 crores. This was taken further by freezing Thomas’s bank accounts, arresting the Wadhwan duo by seizing assets of Rs 3500 crores and Waryam Singh Demat accounts of Rs 100 crore are also seized.
Large deposits withdrawals from PMC Bank in a two-three days span forced RBI to curb on the troubled bank. These withdrawals began on 19 September and it amounted to over 5% of the total deposits.
The withdrawals in large scale with the non-performing assets build-up and attendant capital erosion, made the central bank to enter and step in to place restrictions. The depositor identity withdrawing exact deposits will be disclosed on completion of the inspection. The deposit base on 31 March showed ₹11,500 crore. The financial irregularities revealed a deposit erosion and triggered directions to be imposed on banks.
The PMC Bank scam came into limelight after the information that RBI will look into cooperative bank accounts. Acting swiftly, on September 23, the RBI placed suspended the management of PMC Bank and curbed deposit withdrawals.
The top management confessed that the banks’ non-performing assets were kept hidden and the Wadhawans had been taking loans from PMC Bank and other lenders in the business provided security cover.
Confirmation from Joy Thomas
Thomas after getting caught wrote a letter giving details of how with the other six, including few board members and chairman Waryam Singh gave loans to HDIL.
Thomas said the large accounts missed the statutory auditor’s notice as they check for incremental advances. Thomas said there was a delay in repayments for the past two-three years by the group. Thomas said Rs 96.5 crores was sanctioned by the bank to the group, to repay Bank of India and to avoid bankruptcy. However, this was not approved by the cooperative bank board.
The economic offenses police wing registered case on forgery charges, cheating, and criminal conspiracy. A special investigation team will probe this case, it said.
The Reserve Bank of India ordered PMC Bank to stop business for six months. Initially, the depositor withdrawal was capped at Rs. 1000 throwing many traders, self-employed and daily wage earners into disarray.
RBI has declared an advisory committee after reviewing the liquidity position, enhanced with Rs 10000 and Rs 25000 withdrawal per depositor. The sudden freeze before the festival season upset the customer’s calculations.
RBI enhanced from their PMC Bank the accounts and offered relaxation to help the depositors. RBI confirms that the banking system is sound and stable, leaving no reason for any panic.