PMC Bank crisis: Sarang, Rakesh Kumar Wadhawan sent to police custody till Oct 9

Managing Director of Housing Development Infrastructure Limited (HDIL) Sarang Wadhawan and Whole Time Director Rakesh Kumar Wadhawan have been sent to policy custody until October 9. The Economic Offences Wing (EOW) arrested the two on October 3 and charged them with money-laundering.

In addition, property belonging to the company that is worth Rs 3,500 crore has been provisionally frozen in connection with the Punjab and Maharashtra Cooperative (PMC) Bank case.

The complaint says PMC, with a total loan size of Rs 8,880 crore, handed out 73 percent to of it to HDIL and its group companies that received 44 loans from the bank. This happens to be a huge violation in the regulations that do not allow banks to lend such a massive proportion of cash to any one sector; forget about a single company.

According to PMC Bank's 2018-19 annual report, its net NPA is at 2.19 percent and its gross NPA at 3.76 percent. The doubtful assets as per the auditors were worth Rs 26.66 crore only as on March 31. The annual report says the cash flow of borrowers is affected by the "low liquidity in the economy” that has resulted in “default in servicing the debt”.

The report further states that banks focused more on the MSME sector in FY19.

"...Bank's total Advances for the financial year 2018 -19 is Rs 8,383.33 crore, indicating a net increase of 12.86 per cent i.e Rs 955.25 crore on previous financial year 2017-18. Your Bank has shifted its focus to priority sector advances -- MSME advances to be in line with the regulatory requirements of Reserve Bank of India," CNBC-TV18 quoted the annual report.

Based on the documents seized, the EOW believes that the property was mortgaged to PMC Bank. However, it is still trying to ascertain if the same property was mortgaged to any other bank.

The ongoing investigation has revealed that some employees of the PMC Bank tampered with its software. Around 44 accounts that were mentioned in the FIR did not reflect in the system and the EOW has reason to believe that these accounts were hidden using a password. The bank's staff is still being interrogated

The EOW also searched the residence of PMC Bank Chairman Waryam Singh on October 3, while also freezing his demat account that is worth Rs 100 crore.

Loan amounts worth Rs 2,000 crore were also credited into the personal accounts of two directors of HDIL. There was no record of the same in the PMC's core banking solution (CBS) system.

Meanwhile, there was also a conflict of interest as PMC Bank Chairman Waryam Singh was also on the board of HDIL.

The lender has an exposure of nearly 73 percent of its loan book size to HDIL. The EOW had earlier registered an FIR against senior officials of the bank as well as HDIL.

The EOW has also appointed a special team to carry out investigations in the case.