PMC Bank scam: Five prime accused involved in fraud behind bars now, about Rs 4,000 cr assets seized; all you need to know

FP Staff

With as many as five prime accused involved in the PMC Bank scam are behind the bars, the Economic Offences Wing (EOW) of the Mumbai Police has intensified its investigation to nab all the involved in the fraud. The investigation agency has so far seized assets worth about Rs 4,000 crore belonging to the accused

The EOW has intensified its probe into the scame to nab more people involved in ithe fraud and also is in the process of identifying more moveable and immovable assets belonging to the accused.

Here is a re-look at the events that unfolded the scam:

How the scam was unearthed

On 17 September this year, a whistleblower informed the RBI of the mess at PMC Bank. Acting on it, on 23 September, the central bank had placed PMC Bank under an administrator and suspended the management and also banned it from carrying out regular banking activities.

The whistleblower report has detailed the massive misreporting of non-performing (NPAs) by the bank, primarily because of its huge exposure to crippled developer HDIL that owes around Rs 6,500 crore to the bank-as much as 73 percent of its total loan book€"as per the whistleblower and also its suspended managing director's (MD), Joy Thomas, admission to the RBI.

The bank has been put under restrictions by the RBI after an alleged fraud of Rs 4,355 crore scam came to light following which the deposit withdrawal was initially capped at Rs 1000, causing panic and distress among depositors. Subsequently, it was raised to Rs 10,000 and to Rs 40,000 earlier this week by the RBI.

2 account holders die of heart attack, one commits suicide

Ever since the scam unfolded, as many as three stressed account holders died so far in Mumbai. A depositor of the bank allegedly identified as Nivedita Bijlani (39) committed suicide in Mumbai.

Less than 24 hours after 51-year-old Sanjay Gulati died of cardiac arrest after returning from a protest in the PMC Bank issue, another customer of the scam-hit bank Fattomal Punjabi also died due to heart attack.

SC to hear bank customers' plea on Friday 

As crisis-hit PMC bank depositors intensified their protests, the Supreme Court has agreed to hear on Friday an urgent plea seeking directions for interim measures to safeguard the money of customers blocked in the bank.

The plea on Wednesday for the apex court to step in amid 3 deaths linked to the crisis in the PMC Bank came even as the bank's administrator met the RBI's top brass including governor Shaktikanta Das and assured depositors that all efforts will be made to safeguard their interests.

In the apex court, the plea for urgent listing was mentioned before a bench of justices NV Ramana, R Subhash Reddy and BR Gavai.

"Upon oral mentioning made by the petitioner-in-person seeking an urgent listing of the matter, the registry is directed to list this matter on Friday, the 18th October, 2019 before an appropriate bench, subject to curing of defects," the bench said.

The petition sought a direction for issuance of "exhaustive and comprehensive guideline" to safeguard the banking and cooperative deposits in the eventuality of emergency financial crisis where citizens are financially stranded by the acts of a few "unscrupulous persons". It claimed the bank had 15 lakh depositors.

The plea, filed by Delhi-based Bejon Kumar Misra, said the Centre and the RBI should be directed to ensure complete insulation and insurance of the hard-earned deposited money of people in various cooperative banks, including nationalised banks, by enacting an appropriate measure of 100 percent insurance coverage towards the deposited amount.

The petition has also sought quashing of the RBI notification restricting the limit of withdrawal of the deposits.

PMC Bank chairman, MD, promoters of HDIL arrested

On 4 October, Thomas was arrested in connection with the alleged scam at the bank by the EOW of Mumbai Police, according to a report in Mint.

Thomas was summoned to the EOW office and arrested after questioning.

On 4 October, the EOW had also arrested HDIL directors Rakesh Wadhawan and his son Sarang Wadhawan in the case.

A Mumbai court, meanwhile, remanded Wadhawans and PMC Bank's former chairman Waryam Singh in judicial custody till 23 October.

Singh owns a five-star hotel in Punjab which is valued at current prices at Rs 400 crore to Rs 500 crore from the ill-gotten money of PMC Bank. Moreover, he has property worth Rs 2,500 crore near Juhu beach, the police have alleged

On Thursday, a Mumbai court remanded PMC Bank's former director Surjit Singh Arora in police custody till 22 October in connection with the multi-crore scam at the bank.

Mumbai Police's EOW, which is probing the scam, told the court that Arora "abused his official position to facilitate the fraud".

Meanwhile, the Wadhawans have requested the Reserve Bank of India (RBI) and investigation agencies to sell off their assets, including a yacht, a Rolls Royce car and an aircraft, to pay off the bank's dues.

The HDIL promoters in a letter to the Enforcement Directorate (ED), the Union Finance Ministry and the RBI, requested that they be allowed to sell off 18 of their attached assets.

RBI employees union wants co-operative bank under central bank's control 

In the wake of the scam at PMC Bank, the All-India Reserve Bank Employees Association suggested ending the dual jurisdiction of urban cooperatives and bringing them under RBI jurisdiction.

The union also said RBI should carry out onsite supervision of all cooperative banks instead of the present annual offsite supervision.

PMC Bank is under regulatory restriction since 23 September after the RBI found that financial irregularities at the bank.

Since January, the RBI had placed as many as 24 cooperative banks under its administrator.

"Dual jurisdiction of urban cooperatives under the registrars of cooperative societies of states and RBI should end. It creates unwarranted dichotomy and gives scope for mismanagement and malfeasance. They should come exclusively under the RBI jurisdiction like banks," the union said.

Urban cooperative banks are registered as cooperative societies either with the State Cooperative Societies Act of each state or under the Multi-State Cooperative Societies Act of 2002. They are regulated and supervised by the Registrar of Cooperative Societies of states or by the Central Registrar of Cooperative Societies.

The RBI only regulates and supervises their banking functions and thus has less control on management and carries out on-site inspections and off-site surveillance on them. It also issues operational directions to them to streamline their functioning and to protect the interest of depositors.

"All cooperative banks, particularly their head offices, should be brought under regular on-site supervision of RBI instead of the present offsite surveillance which has failed to detect fraudulent reporting," the union said.

ED seizes assets worth Rs 3,830 cr

On 14 October, the ED seized and identified assets worth Rs 3,830 crore, including private jets and a yacht belonging to the HDIL group, in connection with its probe in the PMC Bank money laundering case, reported PTI.

The central agency said it is in the process of conducting the valuation of a number of properties of HDIL, its directors, promoters, PMC Bank officials and others as part of the investigation.

The assets, both immovable and movable, will be attached under provisions of the Prevention of Money Laundering Act (PMLA) after valuation, it said.

"The total value of movable and immovable assets seized, frozen and identified by ED being the proceeds of crime in this case is more than Rs 3,830 crore which does not include value of 80 unencumbered properties around Mumbai.

High-end assets like ten cars, including Rolls Royce, Bentley and Range Rover, recovered from the residential premises of Rakesh Wadhawan, have been seized.

Two aircraft €"Bombardier Challenger-300 VT and Falcon 2000 VT HDL, owned by Privilege Airways Private Limited -- have been frozen against operation by the agency.

Nirmala Sitharaman's assurance to account holders

On Saturday, assuring account holders of troubled PMC Bank of support, Finance Minister Nirmala Sitharaman said that she has spoken to the RBI governor, who assured that customers' concerns will be taken on top priority.

The bank was put under "directions" by the RBI last month due to weak financial health, wherein the central bank has capped the deposit withdrawals at Rs 25,000.

"Spoken to governor @RBI on the #PMCBank matter. He assured me that clients & their concerns will be kept on top priority. I wish to reiterate that @FinMinIndia will ensure that customers concerns are comprehensively addressed. We understand the justified worries of the customers," she said in a tweet.

Former MD's letter blames auditors for mess

The suspended managing director of PMC Bank, Joy Thomas, has blamed the auditors for the mess at the bank, accusing them of only "superficially auditing" the books of the now crippled lender due to "time constraints".

In a five-page letter to the RBI dated 21 September after a board member blew the lid on the fraud at PMC Bank, which is among the top ten urban cooperative banks, Thomas has confessed to the role of the top management, including a few board members, in hiding the actual NPA numbers and also the actual exposure to the bankrupt HDIL, which is stated to be around Rs 6,500 crore or over 73 per cent of its total loan book of Rs 8,880 crore.

While Thomas has not named any auditor in the letter to the RBI written two days before the regulatory clamp down which PTI has reviewed, according to its annual report for FY19, the bank had three auditors €" Lakdawal & Co, Ashok Jayesh & Associates and DB Ketkar & Co since FY11.

The shallow auditing of the books of PMC by its statutory auditors was done as the 'bank was growing', Thomas claimed in the letter.

The letter of Thomas is part of the first information report (FIR) filed by the EOW of the Mumbai Police.

"Since the bank was growing the statutory auditors, due to their time constraints, were checking only the incremental advances and not the entire operations in all the accounts," Thomas claimed in the letter.

"The statutory auditors validated the incremental loans and advances and scrutinised the accounts which were shown to them by the bank," he added.

In the past eight years, PMC Bank had three statutory auditors €" Lakdawal & Co (FY19 and FY18); Ashok Jayesh & Associates (FY17, FY15, and FY11) and DB Ketkar & Co (FY14 and FY12).

Thomas confirmed that the exposure to the bankrupt HDIL Group continued to remain standard despite there was delay in repayments for over three years. The bank's exposure to HDIL Group was around Rs 6,500 crore as of September 19, 2019, he admitted in the letter.

He said some of the large accounts were not reported to the RBI from 2008 because of fear of reputational risks.

"The concealment of information from the board, auditors and regulators was due to the fear of reputational loss," Thomas informed the RBI.

He said prior to 2015, a few top borrowers would be mostly checked as reported by the bank branch-wise, therefore those accounts did not come into the picture and it was around 2017 onwards when the RBI started asking for details of the advances.

Thomas embraced Islam to marry assistant

Thomas, the former managing director of scam-hit PMC Bank, converted to Islam and became Junaid Khan to marry his personal assistant, with whom he allegedly jointly owns 10 properties in Pune, said a report in NDTV quoting police officials.

The Mumbai police's EOW, which is investigating the fraud case, has found that since 2012, Thomas, 62, had purchased nine flats and a shop in Kondhwa and other areas of Pune.

These ten properties were purchased jointly by Thomas and his second wife, who was his former assistant at the bank, the officials said.

All these properties were bought by the husband-wife duo since the beginning of 2012, they said.

This was also the time when the Wadhawans of HDIL began to default on loans taken from the bank, but kept borrowing additional amounts from the cooperative lender, they said.

The source of money used by Thomas and his second wife to buy these properties is being ascertained, they said.

"We are yet to find out the share percentage of ownership in these ten properties," an official said.

Besides the ten properties in Pune, Thomas also owns a flat in adjoining Thane and a commercial property which is under the control of his son from his first wife, he said.

HDIL accounted for over 70% of PMC Bank advances

HDIL allegedly accounted for over 70 percent of the bank's Rs 9,000 crore advances. According to the Mumbai Police's Economic Offences Wing, HDIL's loans turned non-performing assets (NPAs), but the bank management allegedly hid this from the RBI's scrutiny.

The bank, over a long period of time, had given over Rs 6,500 crore in loans to HDIL, which is 73 percent of its total advances, and which has turned sour with a shift in the fortunes of the now-bankrupt company.

Its total loans stand at Rs 8,880 crore and the deposits at over Rs 11,610 crore. There have been massive protests across the city from the depositors following the RBI action.

It is found that around 21,049 bank accounts were opened by bogus names to conceal 44 loan accounts. The bank's software was also tampered to conceal these loan accounts.

€" With inputs from agencies

Also See: PMC Bank scam: HDIL promoters' Wadhawans, former chairman Waryam Singh remanded to judicial custody till 23 October

PMC Bank crisis: Administrator assures to protect interests of depositors, stakeholders; meets RBI governor Shaktikanta Das

PMC Bank scam: Finance Minister Nirmala Sitharaman faces protesters; promises legislation

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