Joy Thomas, who has been suspended as the managing director of Punjab and Maharashtra Co-operative Bank, on Friday held a sudden press conference in his capacity and admitted that the bank hid information regarding its bad loans to bankrupt real estate company HDIL. He said the breach in exposure limit to the RBI was not reported for about six-seven years. He said loans granted by the bank were not classified as none-performing assets to avoid the RBI action, and that it would have hampered the bank's growth.
Thomas also confessed that the bank had been associated with Housing Development and Infrastructure Limited since 1989. The bankrupt real estate firm's exposure to the bank stands at over Rs 2,500 crore, around 31 per cent of the bank's loan book of Rs 8,300 crore as of March 2019. Thomas said the bank didn't report the matter to the RBI even though repayment from HDIL was irregular for the past three-four years because it held security, which was worth twice the loan amount.
Thomas said the Reserve Bank of India should have managed the situation in a better way rather than hastily placing restrictions on PMC Bank customers' cash withdrawal.
"Whatever has happened is not a fraud, nobody has run away with the money without providing security, it is a technical matter which could have been managed better," he said, reported ANI. The RBI, after superseding its management and placing it under an administrator for the next six months, capped cash withdrawal at Rs 1,000 per customer and banned the bank from making fresh lending during this period. After an uproar over the withdraw limit, the central bank increased the limit to Rs 10,000.
Thomas said the bank management had apprised the RBI executive director about the issue on September 19, following which the RBI barred the bank from conducting normal operations and suspended its board on September 23. "The divergence was only on HDIL. There was a difference between what we were reporting and what the actual numbers were. There was a delay on repayment for the last two-three years and we have been under-reporting that," Thomas admitted.
Calling the RBI decision a bit harsh, Thomas said PMC Bank has sufficient liquidity and maintained the necessary reserves under CRR (cash reserve ratio). "We feel that it is a harsh decision since we had gone to the RBI officials," he added. He had earlier also said the bank has cash liquidity of around Rs 4,000 crore in the form of SLR (statutory liquidity ratio) and CRR or cash reserve ratio, while its liabilities are around Rs 11,600 crore.
However, reports suggest Thomas and his team revealed the whole thing after a senior PMC Bank branch manager turned rebel and informed the RBI about everything.
The PMC Bank had sanctioned a loan worth Rs 96 crore to HDIL in August even though HDIL was admitted to the Insolvency and Bankruptcy Code (IBC). Thomas also didn't explain about the conflict of interest arising out of HDIL board member Waryam Singh's appointment as its chairman in 2015. Waryam Singh had also served as the bank's chairman from 1999 to 2005. He claimed there was no pressure from anyone on disbursing loans to HDIL and that the decision was taken by its central committee.
Interestingly, Waryam had sold 1.1 per cent stake, about 79.9 lakh shares, in HDIL on March 22. Thomas had earlier called HDIL as "an old customer", which has been supporting the bank for years.
Meanwhile, the RBI-appointed administrator of PMC Bank is planning to file an FIR against Thomas for misrepresenting the bank's loan books and not revealing about the bad loans of HDIL.
Edited by Manoj Sharma with agency inputs
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