Mumbai Police files FIR in Rs 4,355-crore PMC Bank 'scam'

Former chairman Singh, MD Joy Thomas, HDIL promoters, 7 other realty companies named in EOW FIR.

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The FIR has been registered under certain sections of the Indian Penal Code (IPC) including those for cheating (420), criminal breach of trust by banker (409), forgery (465), using as genuine a forged document (471) and criminal conspiracy (120(B)).
MUMBAI: The Economic Offences Wing (EOW) of Mumbai Police registered a first information report (FIR) on the alleged fund diversion at Punjab Maharashtra Cooperative (PMC) Bank that had led the Reserve Bank of India (RBI) to restrict withdrawals by depositors. According to the FIR, the amount involved in the alleged irregularities has been pegged at Rs 4,355.46 crore but that could go up during the course of the probe.

The case was filed against erstwhile chairman Waryam Singh, managing director Joy Thomas, another bank official, Housing Development and Infrastructure Ltd (HDIL) promoters Sarang and Rakesh Wadhawan and seven realty companies through which funds were allegedly diverted. More than two-thirds of PMC Bank’s loan exposure is to bankrupt developer HDIL. Thomas is said to have shouldered the blame for the bank’s troubles.

The FIR has been registered under Indian Penal Code (IPC) sections such as those on cheating (420), criminal breach of trust by a banker (409), forgery (465), forged documents (471) and criminal conspiracy (120(B). The scope of the probe will include favours allegedly extended to accused borrowers, violation of RBI and other regulatory norms and will examine any quid pro quo between the erstwhile board of directors and borrowers to allow loans in violation of norms.


Mumbai Police is also in the process of issuing lookout circulars (LOCs) against key accused including the erstwhile chairman of PMC and the HDIL promoters.

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Thomas to be Questioned First
“We have learnt that former chairman Singh has some business interests in Canada,” said one of the persons. “Like him, we fear that the other key accused might flee the country, and therefore, as a preventive measure, a request to open LOCs against the key accused will soon be sent.”
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Late in the evening, a police team was despatched to Thomas’ suburban Mumbai residence.

The manager at PMC’s Bhandup branch “has lodged a complaint on behalf of the RBI-appointed administrator, JH Bhoria. His complaint is the starting point of the probe. While we suspect that the quantum could be above Rs 6,000 crore, the amount has been mentioned by the complainant and the same has been noted in the FIR,” said an official. “Thomas would be the first official to be questioned in the case. All the other mentioned will also be called in due course and if coercive action is required, the same would be taken.”

The official said that a letter written by Thomas to the regulator “accepting irregularities and favours to HDIL” won’t be part of the probe. The administrator had been trying to file the complaint since Friday, but it was registered on Monday after clarifications from the police were answered.

“While so far only one borrower, HDIL, has been named in the FIR, the probe will look into (whether) similar favours were extended to other borrowers and also the role of the other private real estate firms that alleged help round tripping the funds,” said another official.
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A total of six people including Thomas, Singh, board members and other bank officials set up thousands of fictitious accounts for HDIL, allowing the bank to keep the loans outside the regulatory gaze. The matter came to the attention of the RBI after a whistleblower wrote to the central bank’s Department of Cooperative Bank Supervision (DCBS) alleging falsifications in the bank’s books.

Thomas then met RBI executive director Rabi Mishra and allegedly admitted to hiding the bank’s exposure to HDIL. Thomas, who joined the bank in 1989 and was elevated to MD in 1999, said that as much 60% of the transactions of the bank are to this one group.
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The group’s payments were regular till 2011 when it faced trouble because of a large slum rehabilitation project it was developing near the Mumbai airport. Payments to the bank were impacted after this but the management hid it from the board. The bank’s statutory auditor Lakdawala & Co also validated only incremental loans and not all the accounts of the bank.

After the RBI asked for an indent of all advances during an inspection in 2017, the stressed accounts of the group were replaced by dummy accounts and matched by outstanding balances in the balance sheet. These accounts were not checked by the RBI because they were mentioned as loans against deposits and were of lower value. As far back as 2011, the HDIL Group had Rs 1,026 crore of outstanding loans or more than 50% of the bank’s total loan book of Rs 2,000 crore.

Thomas is said to have taken all the blame for the bank’s decisions with regard to HDIL. He also met officials of the HDIL Group as recently as September 21 just before the RBI direction in order to ask for a special charge on the company's assets. As of September, the bank had a Rs 6,226 crore exposure to the company, down from Rs 6,500 crore in March after around Rs 150 crore of deposits from the group were adjusted against the loans. Officially, the bank showed only Rs 255 crore as loans to HDIL in March 2018, which increased to Rs 480 crore in March 2019.

RBI limited withdrawals from the bank on September 23, fearing a run on deposits. As much as 63% of the bank’s accounts had deposits of Rs 10,000 and below, which amounted to just Rs 915 crore, while bulk deposits totaled Rs 10,702 crore, accounting for 92% of the total Rs 11,617 crore deposits. The central bank was concerned that large depositors having more information about the bank’s situation would pull out their money. The per account withdrawal limit was initially set at Rs 1000 and has since been increased to Rs 10,000.
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