Using more than 21,000 fake accounts to inflate the financial position of the bank; hiding the loans it made, PMC Bank crisis runs deeper in frauds than the RBI assumed. This information was discovered according to a police complaint lodged by officials, reported NDTV.
This complaint was filed with the Economic Offences Wing (EOW) on September 30 and later had been seen by Reuters. According to Reuters, the complainant accused the bank's management of underplaying non-performing assets and extending loans despite a bad condition of the bank’s financial affairs, leading to a loss of at least 43.55 billion rupees ($616.5 million).
"The actual financial position of the bank was camouflaged, and the bank deceptively reflected a rosy picture of its financial parameters," said the complaint, asking why fake accounts were not shown in the bank’s core system. This was also one of the major reasons how the scam in the Punjab National Bank was discovered. The complaint refers to the bank's Chairman Waryam Singh and its Managing Director Joy Thomas, along with other bank officials, and accuses them of criminal breach of trust, forgery and falsification of records.
Bankrupt realty company Housing Development and Infrastructure Ltd (HDIL), one of the beneficiaries of the loans given out by the bank, is also mentioned in the complaint. Indian media outlets on Sunday reported that PMC's exposure to bankrupt HDIL stood at 65 billion rupees, which accounts for 73 per cent of its overall 88.8 billion loan book - well above the RBI's permissible exposure levels to a single entity.
A senior government official told Reuters that a serious pertinent fraud investigation will take place to check the alleged wrongdoing by HDIL in the PMC crisis, hoping to conclude matters by the end of two months. PMC and HDIL did not immediately respond to requests for comment. The Reserve Bank of India (RBI) said it had no comment, as reported by Reuters.
What strikes in this issue the most is that there is still no redressal for the account holders, who are bearing the brunt of this crisis mostly by themselves. Dozens of account holders gathered outside an RBI office in Mumbai on Tuesday to protest against the restrictions that affect only the account holders and demanded RBI and government to intervene to release their funds. The RBI has stopped the bank from regenerating or giving out any loans or making investments without prior approval of the central bank, while depositors have been informed that they can only withdraw a maximum of 10,000 rupees (USD 140) from their PMC accounts over the next six months.