PMC CREATED OVER 21,000 FAKE ACCOUNTS TO HIDE LOANS: REPORT

More than two dozen co-operative banks are now under RBI administration, but PMC Bank - with deposits of Rs 11,620 crore as of March 31 - is by far the largest

MUMBAI: Punjab and Maharashtra Co-operative (PMC) Bank used more than 21,000 fictitious accounts to hide loans it made, according to a police complaint lodged by Indian officials, in the latest banking fraud case to spook the country's depositors and investors.

The complaint, filed with the Economic Offences Wing (EOW) of Mumbai Police on Monday and later seen by Reuters, accuses the bank's management of concealing non-performing assets and disbursing loans leading to a loss of at least Rs 4,355 crore ($616.5 million).

A single realty firm and its group companies were the beneficiaries of 44 loans, according to the complaint.

“The actual financial position of the bank was camouflaged, & the bank deceptively reflected a rosy picture of its financial parameters,” said the complaint, noting that the fictitious loan accounts were not entered into the bank's core banking system - a factor key in the perpetration of a $2 billion fraud at Punjab National Bank that was uncovered in 2018.

The complaint names the bank's chairman Waryam Singh and its managing director Joy Thomas, along with other bank officials, and accuses them of criminal breach of trust, forgery and falsification of records.

It also names bankrupt realty company Housing Development and Infrastructure Ltd, along with its former senior executives Sarang Wadhwan and Rakesh Wadhwan, who were beneficiaries of the loans.

A senior government official late on Tuesday said that the serious fraud investigation office will look into the alleged wrong doing by HDIL in the PMC case, expecting to complete the investigation in the next two months.

PMC Bank and HDIL did not immediately respond to requests for comment. The Reserve Bank of India (RBI) said it had no comment.

The PMC case has sparked renewed concerns about the health of India's troubled banking sector, which has been rocked by a multi-billion dollar fraud at a state-run lender, the collapse of a major infrastructure lender, bad loan issues at state-run banks and a liquidity squeeze that has hit shadow

lenders.

More than two dozen cooperative banks are now under RBI administration, but PMC Bank - with deposits of Rs 11,620 crore as of March 31 is by far the largest.

The RBI last week moved to take charge of PMC Bank, one of India's top five co-operative lenders with more than 9,00,000 depositors, and suspended Thomas and the bank's board after uncovering lending irregularities

The RBI has barred the bank from renewing or granting any loans or making investments without prior approval of the central bank, while depositors have been informed they can only withdraw a maximum of Rs 10,000 ($140) from their PMC accounts over the next six months.

Dozens of account holders gathered outside an RBI office in Mumbai on Tuesday to protest against the curbs and demand that the central bank and government intervene to release their funds.

In a letter written by Thomas to the RBI that allegedly blew the lid off the scam, he says that he oversaw the fraud and hid details from the regulator for fear of reputational risks to the bank. Reuters reviewed a copy of the letter.

The police complaint against PMC and HDIL officials was filed at the behest of an administrator, whom the RBI appointed

last week to oversee the bank's operations.

The complaint alleges that the PMC officials misled the RBI for over a decade from 2008 to August 2019 by failing to disclose big accounts that had become non-performing assets by producing forged audit reports.

It was reported on Sunday that PMC Bank's exposure to bankrupt HDIL stood at Rs 6,500 crore, which accounts for 73 per cent of its overall Rs 8,880 crore loan book - well above the RBI'S permissible exposure levels to a single entity.