NEW DELHI: Joy Thomas, the now-suspended managing director of the crisis-hit Punjab and Maharashtra Cooperative (PMC) Bank, has reportedly admitted to RBI that the bank’s actual exposure to the bankrupt Housing Development and Infrastructure Limited (HDIL) is over Rs 6,500 crore, a whopping 73% of the bank’s then net worth.
The revelation came after a board member sent the balance sheet to RBI. On Friday, Thomas claimed that the exposure was Rs 2,500 crore. The slum-redevelopment focussed HDIL went bankrupt after many projects in Mumbai failed.
The Reserve Bank of India (RBI), along with the Department of Financial Services (DFS), will initiate a review of the books of all cooperative banks to detect if there are instances of “misreporting” of stressed assets. The move is in the backdrop of Punjab and Maharashtra Cooperative Bank (PMC Bank) fiasco that unfurled last week.
“The RBI is already inspecting the PMC Bank case. In the coming few weeks, the central bank and the Department of Financial Services will review the accounts of cooperative banks. The DFS will have an internal review meeting in this regard,” a senior finance ministry official told this publication.
According to the official, the review meeting will happen next week, which will be headed by Secretary, DFS.
“We are keeping a close eye on the situation. The current situation arose due to the negligence of the bank’s senior management. We have received negative feedback from some other banks. This is just a proactive measure. We will carefully examine the books of large urban cooperative banks. The government will ensure that no PMC Bank-like situation happens,” the official added.
According to the official, preliminary inspection has revealed that whistleblowers at three more large cooperative banks have reported underreporting of loans.
However, the official also added that these are “preliminary information and we are already examining it. At this point, there is no need to blow it out of proportion.”
Last week, the RBI initiated action against PMC Bank after its senior management approached the central bank for a resolution plan for its bad loans that had gone undetected for the last six-seven years.
PMC Bank was among the top 10 cooperative lenders in the country. Sensing the financial crisis, the RBI put a cap of Rs 1,000 on cash withdrawal, causing huge public outcry. Angry depositors gathered outside different branches of the bank to withdraw their money.
By Thursday, RBI increased the cash withdrawal limit to Rs 10,000, but it has kept retail investors and depositors in several cooperative banks wary.
On September 27, the bank’s managing director Joy Thomas admitted in a press briefing that loans given to HDIL had not only breached group exposure norms but were also not classified as non-performing assets to protect the bank’s growth prospects.
“The officials have flouted norms, and misreporting and under-reporting are serious violations. The other cooperative banks have been asked to come out clean if they have misreported or under-reported stressed loans,” the finance ministry official added.
The PMC Bank may shortly file a case against the former management for financial irregularities, with the Economic Offence Wing (EOW) of the Mumbai Police.