Thomas also said that he heard the RBI is now planning of increasing the withdrawal limit to Rs 1 lakh.
Punjab & Maharashtra Cooperative Bank (PMC Bank) breached its group exposure limit and did not classify loans given to Housing Development & Infrastructure (HDIL) as bad loans even as the real estate company stopped repaying them several years ago.
Joy Thomas, the lender’s managing director, who was suspended earlier this week, spoke to reporters in Mumbai on September 27. He said that the bank’s total exposure to HDIL group entities stood at Rs 2500 crore, which was extended on sufficient collateral in the form of land and buildings worth 2.5 times the loans granted.
Thomas said that the bank did not disclose its non-performing assets (NPAs) to the central bank over the years in order to protect its growth prospects. “Whatever has happened is not fraud, it is technical in nature and we could have rectified it without affecting the depositors,” he said.
With total advances at Rs 8,400 crore as on March 31, the exposure to HDIL group comes to almost a third of the bank’s loan book. Such aberrations went undetected in spite of annual inspections carried out by the banking regulator over the years.
Last month, the bank went on to extend fresh loans of Rs 96.5 crore to HDIL. Thomas said that it was done to avoid bankruptcy proceedings for the company.
Thomas said that the bank’s management approached the Reserve Bank of India (RBI) on September 19 to flag these loans and seek help with a resolution plan. But the regulator decided to issue directions after close of business hours on September 23. This year’s annual inspection by RBI was due this month.
The bank has been barred from carrying out basic banking services. The cash withdrawals have been restricted to Rs 10,000 per depositor, which was raised from Rs 1000 earlier.
An RBI-appointed officer is now overseeing the operations of the bank, as the board has been superseded and its managing director suspended. The officer has initiated and inspection that will take another two to three weeks. There could be more relaxations upon further review.
Thomas said he has heard that the withdrawal limit may be increased to Rs 1 lakh going ahead.PMC bank is one of the 62 banks registered under Multi-State Co-operative Societies Act, 2002. It comes under the purview of Central Registrar due to involvement of more than one state. As per the norms, the Central Registrar can order winding up of the bank on recommendation of the RBI.The Great Diwali Discount!
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