Suspended PMC Bank Chief Hid Info From RBI Fearing "Reputational Loss"

Former Punjab Maharashtra Co-operative Bank (PMC) Managing Director Joy Thomas has admitted to misleading the Reserve Bank of India (RBI) for six to seven years by concealing and misreporting default on loans reportedly worth Rs 6,500 crore taken by crisis-hit real estate firm Housing Development and Infrastructure Ltd (HDIL). In a letter addressed to the central bank, Mr Thomas, who has been suspended for his role in the crisis and has been named in a first information report (FIR), said the bank concealed information from board members, auditors and regulators due to "fear of reputational loss".

"... As the loans outstanding were huge and if these were classified as NPA (non-performing assets) it would have affected the profitability of the bank... this would have created reputation risk for the bank. As the HDIL group had a good record of clearing dues with certain delays we continued to report all the accounts as standard accounts," Mr Thomas's letter read.

"Though some of the accounts were not performing well, it was not brought to the notice of the board... subsequent overdues of various loans were also not reported... concealment of information from board, auditors and regulators was due to the fear of reputational loss," the letter said.

It also explains that "... in connection with their (land) business their accounts used to get overdrawn and thereafter they used to get cleared also in due course of time. In the process, our bank used to charge 18 per cent to 24 per cent interest and earned very good profit".

The letter goes on to say that when RBI officers began asking for details in 2017 "... stressed legacy accounts belonging to this group were replaced with dummy accounts..."

PMC's exposure to HDIL is nearly 73 per cent of its total loan book size of Rs 8,880 crore as of September 19, PTI reported quoting an unnamed source. In 2006/07 that figure was Rs 500 crore and it was Rs 1,026 crore in 2011.

In the six-page letter, Joy Thomas details the birth and growth of the relationship between PMC Bank and HDIL and refers to at least three occasions in which the company infused funds when the bank was struggling, including a Rs 100 crore payment in 2004.

PMC_Bank_MD_Joy_Thomas_letter by NDTV on Scribd

The letter concludes with Mr Thomas taking full responsibility for "granting of overdrawals". "The executives had no role in allowing overdrawals... they were doing it as per my instructions...," he concluded.

Speaking to the press on Friday, he also assured irate customers they would not lose their money.

"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," Mr Thomas said. He also accused the RBI of failing to manage the situation.

The RBI has responded to allay fears over crisis surrounding PMC Bank.

"There are rumours in some locations about certain banks including cooperative banks, resulting in anxiety among the depositors. RBI would like to assure the general public that Indian banking system is safe and stable and there is no need to panic on the basis of such rumours," the RBI said in a tweet.

Meanwhile, a police case has been filed against Sarang Wadhwan and Rakesh Kumar Wadhwan (who has been named in Mr Thomas's letter).

The PMC bank crisis made headlines last week after the RBI limited withdrawals to a sum not exceeding Rs 1,000 for a period of six months, in a move that led to protests by customers. The limit was raised to Rs 10,000 but angry customers continued to protest.

With input from PTI