RBI got a whiff of evergreening at Punjab and Maharashtra Co-operative Bank

The RBI also struggled as cooperative banks are also regulated by states, and PMC Bank was a multi-state cooperative bank
The Reserve Bank of India (RBI) suspected that Punjab and Maharashtra Co-operative Bank (PMC Bank) was evergreening loans for some time, especially since the last statutory audit. At one point, it had contemplated sacking the bank’s managing director and CEO Joy Thomas, but did not find enough documentary evidence as even the source materials were falsified, according to highly placed sources. 

“Misgovernance by the board of directors of the bank and the interconnectedness between Chairman Waryam Singh and the HDIL group companies have been under the RBI’s scanner for some time. However, manipulation of data and fraud 

always takes time to establish and as soon as sufficient evidence was available, RBI swung into action by superseding the board, to protect the interests of present and future depositors,” said a source.

The RBI had already sought explanation from the bank regarding the interconnectedness between Waryam Singh and HDIL group, especially in the backdrop of sanctioning credit facilities to HDIL companies and unexplained transactions between the group accounts. 

The central bank had flagged large- scale evergreening of group accounts, which were categorised as non-performing advances by the RBI, though they were treated as standard by the bank. The RBI started inspection of the bank on September 19, raising the same questions, leading to Thomas and his team confessing their misdeeds, sources say. 

Where the RBI struggled was that the source documents were forged, and legacy accounts were replaced by dummy accounts, Business Standard has learnt. 


The central bank also struggled as cooperative banks are also regulated by states. And PMC Bank was a multi-state cooperative bank. 

“Any regulator or supervisor cannot begin his work suspecting the regulated and supervised entities of committing a fraud; there has to be a minimum amount of trust between the supervisor and the supervised and there is no end to an investigation if every bit of information or data submitted by the entities is viewed with suspicion and mistrust,” said a source. 

The Reserve Bank, apart from relying on the statutory auditor’s reported figures, also gets vital information of banks through periodical off-site returns as well as data on various underlying information provided to the inspectors by the bank to arrive at a complete and correct understanding of a bank’s financials. 

“It goes without saying that such returns and data submitted to the regulator are expected to be authentic and accurate. The bank had actually concealed and falsified vital data that it furnished to the RBI with a deliberate intent to mislead and misrepresent facts,” said the person quoted above. 


A first information report (FIR) will be filed on Monday, for now against Joy Thomas, sacked managing director and CEO of PMC Bank. PMC Bank officials have informed the RBI that the bank was almost solely reliant on HDIL group for its growth, and made every attempt to keep it concealed, even from board members, say sources. 

“The RBI was not unaware of the irregularities in the sanction of various credit facilities to HDIL and its group companies. The MD’s confession only hastened the action,” said another source. 

As soon as the manipulation of data was established, it became imperative for the regulator to take swift action and freeze withdrawal of deposits, which is the standard protocol. The administrator had taken time to establish the mean deposit pattern. It was found that 64 per cent of the depositors had less than Rs 10,000 in their bank accounts. Thus, the central bank raised the withdrawal limit to Rs 10,000 from Rs 1,000. 


This limit, however, could be raised even further to cover more than 75 per cent of the depositors, said a source.


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