What Is PMC?
Punjab Maharashtra Co-operative Bank is a Scheduled Commercial bank situated in 6 states of the country. This bank was established on February 13, 1984, as a single branch Bank. In 35 years, the Bank has a wide network of 137 branches across six states. This bank has total deposits of about Rs 11,617.34 crore.
How the Fraud Happened?
The fraud at the Punjab and Maharashtra Cooperative (PMC) Bank came to light in September 2019 after the Reserve Bank of India found that the PMC Bank had allegedly created fictitious accounts to hide over Rs 4,355 crore of loans extended to the almost-bankrupt HDIL.
According to RBI, the PMC Bank masked 44 problematic loan accounts, including HDIL, by allegedly tampering with its core banking system, and the accounts were accessible only to limited staff members. The economic offences wing of Mumbai Police and the Enforcement Directorate later registered offences against senior officials of the bank and Wadhawan’s.
Role of RBI in the PMC Fraud
On September 23 2019, the RBI imposed regulatory restrictions on the PMC Bank for six months over alleged financial irregularities. The withdrawal limit for account holders was initially Rs 1,000 per customer for six months, which was later raised to Rs 10,000 and then to Rs 40,000. The court said that the RBI knows all the affairs of the bank in question, the RBI is the bankers' bank and an expert body on such issues and that they don’t want to interfere and dilute in RBI’s authority.
It said in such financial issues, the RBI will be the judge and not the court. It directed the RBI to file its affidavit and posted the matter for further hearing on November 19. The court refused to grant any interim relief in the matter. The bench said by filing multiple petitions, lawyers should not give false hopes to depositors that the courts will help them. "Courts are not magicians. Let us not give false hopes to the depositors," Justice Dhar Adhikari said. The court said while it is aware several depositors are left in the lurch, but it also cannot be said that many of the depositors were unaware of what was happening in the bank.
The petitions have been filed by persons claiming to be depositors and account holders of the bank. The RBI restrictions earlier triggered protests by depositors and account holders of the cooperative lender. It said the directives have caused anguish and sufferings to people whose hard-earned money is locked in the bank.
The petitions have been filed by persons claiming to be depositors and account holders of the bank. The RBI restrictions earlier triggered protests by depositors and account holders of the cooperative lender. It said the directives have caused anguish and sufferings to people whose hard-earned money is locked in the bank.
The petitions sought quashing of the RBI's decision. The crisis at the bank is attributed to loans made to realty player Housing Development Infrastructure Ltd (HDIL), which were allegedly hidden from regulators' scrutiny, turning into non-performing assets. Five persons, including HDIL promoters and the bank's top management, have been arrested.
The Enforcement Directorate too is investigating the case and has attached the assets of HDIL promoters, Rakesh Wadhawan and his son Sarang Wadhawan, who are in its custody. Over Rs, 6,500 crores of the bank's advances of Rs 9,000 crore were made to either HDIL or dummy companies affiliated with it, which have gone sour. The bank has deposits of over Rs 11,000 crore and the RBI has said that 77 per cent of the depositors can withdraw their money with the Rs 40,000 limit. The administrator put by RBI to oversee the bank's operations is presently restating the books to present a fair picture of its financial strength.
Epilogue
It’s extremely disturbing that the dice is heavily loaded against the common man. Middle-class people end up paying a heavy price for all these scams. It is extremely worrying that depositors across co-operative banks are panicking about their hard-earned money and there is an urgent need for a sustained unified joint effort to take on the RBI, he said. He called on all the aggrieved people to join forces and file a writ petition. despite regular audits, inspection and concurrent audits, banks regularly end up defrauded. The system is rotten and if we need to fix the system then we need to fight unitedly.
Written by - Sharmistha Pratap
Edited by - Gunika Manchanda
The Enforcement Directorate too is investigating the case and has attached the assets of HDIL promoters, Rakesh Wadhawan and his son Sarang Wadhawan, who are in its custody. Over Rs, 6,500 crores of the bank's advances of Rs 9,000 crore were made to either HDIL or dummy companies affiliated with it, which have gone sour. The bank has deposits of over Rs 11,000 crore and the RBI has said that 77 per cent of the depositors can withdraw their money with the Rs 40,000 limit. The administrator put by RBI to oversee the bank's operations is presently restating the books to present a fair picture of its financial strength.
Epilogue
It’s extremely disturbing that the dice is heavily loaded against the common man. Middle-class people end up paying a heavy price for all these scams. It is extremely worrying that depositors across co-operative banks are panicking about their hard-earned money and there is an urgent need for a sustained unified joint effort to take on the RBI, he said. He called on all the aggrieved people to join forces and file a writ petition. despite regular audits, inspection and concurrent audits, banks regularly end up defrauded. The system is rotten and if we need to fix the system then we need to fight unitedly.
Written by - Sharmistha Pratap
Edited by - Gunika Manchanda
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