PMC bank scam: The Crux

In a scenario where the economy is facing crisis and when especially, the banking sector is
experiencing instability due to increase in number of Non-Performing Assets (NPA) ,
involvement of yet another bank in fraudulent activities has acted as a fuel to fire as it has
worsen the already worse situation. The Punjab and Maharashtra Cooperative (PMC) Bank has
been in limelight recently for its involvement in fraudulent activities. The bank was established
in 1984 and has had a smooth operation until present day. PMC bank is said to be hiding material
information about NPAs involving huge amount of loans given to the Housing Development and
Infrastructure Ltd. (HDIL) by the higher management at PMC. About 70% of the bank’s credit
facilities were rendered as loans to HDIL. It is quite illogical to grasp that a fraud involving such
huge amount was unrecognized for so long, to understand the roots of the fraud it is important to
understand how precisely every step was taken:

- These transactions were concealed by opening around 21049 fraud bank accounts. It is
through these bank accounts that the lump sum amount was divided into smaller amounts
and transactions of rendering loans were carried out in order to not bring HDIL into the
picture.
- The bank’s software was manipulated to accommodate and manage the fraudulent
transactions in such a way that they cannot be noticed by auditors and other relevant
scrutinizers.

These “ghost” accounts comprising of the laundered money were brought to notice to the
Reserve Bank of India (RBI) by the women employees in credit department of PMC bank.
Taking the information into account, RBI investigated the scam and many secrets about the
depth of this fraud were revealed:

- The issue was handed over to Enforcement Directorate (ED) for investigation; ED has
found measures to recover the loan amount by seizing the movable and immovable assets
of HDIL with the motive to recover at least some part of the loan rendered.
- As of October 2019, an amount of Rs. 3830 crores has been valued out of the seized
assets. The total proceeds required to be recovered for this crime has amounted to
approximately Rs. 4355 crores.
- The assets seized include luxury cars like Rolls Royce, Audi, Bentley etc., jewelry, fixed
deposits, aircrafts, yachts, and bank balances.
- During investigation, various other incriminating documents have been realized that
include property documents and other movable properties.
- Various other properties in and around Mumbai are still to be valued, some of which are
still being verified.
- Former Managing Director of PMC bank, Joy Thomas has disclosed that transactions
taking place within the bank were manipulated since 2008 in order to hide the amount
 that was given to HDIL in form of a loan so that it is not identified by the auditors in
order to avoid increase in NPAs of the bank.
- According to Joy Thomas, the decision of concealing this information was taken in order
to secure the reputation of the bank as well as HDIL; this was because majority of PMC
bank’s business came from HDIL.

In spite of the havoc being created, the higher authority at the PMC banks does not consider this
act as a fraud and claims that this was a technical matter which was mishandled and can be
rectified sooner or later. Further information on the proceedings of investigations are much
awaited as RBI’s final decision with respect to PMC bank will be dependent on it , and also
because ultimately the depositors are the ones facing the shortcomings of this “mishandled” issue
which is unfair at many levels.

Regards,

Rahul Chawla