PMC Bank Scam: 8 years before the scam was exposed: the whistleblower warned the RBI

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PMC Bank Scam: 8 years before the scam was exposed: the whistleblower warned the RBI- The way has been cleared for the depositors of PMC Bank trapped in the scam to get money. About 10 days ago, RBI approved the proposal of financial services company Centrum Financial Services and BharatPe to take over PMC Bank. Centrum Financial Services and BharatPe will form a small finance bank to run this co-operative bank which will work under the supervision of RBI under an amalgamation scheme. The scheme is expected to be announced soon. This decision of RBI will give a big relief to the depositors of PMC Bank.

In the year 2019, when the PMC Bank scam came to light, in September 2019, the Reserve Bank dissolved the board of directors of PMC Bank and put it under regulatory supervision and imposed many restrictions on the bank, which is now till the completion of the acquisition on December 31. done till 2021. But the big question is, could this scam have been avoided?

The evidence we have found shows that RBI had received enough alarms and scam signals, which if implemented in time could have prevented this scam, which led to PMC Bank sinking. Because 8 years before this scam became public, a whistleblower had written a letter to RBI warning about the fraud happening in the bank.

On January 28, 2011, a PMC Bank official wrote a letter to A Udgata, Chief General Manager, Urban Bank, RBI, informing him about the disturbances in PMC Bank. In this letter, the whistleblower told the RBI about the frauds taking place in the dealings of PMC Bank with HDIL and DHFL.

Let us tell you that later both HDIL and DHFL went bankrupt by drowning in debt. In this letter, the whistleblower had exposed the nexus of PMC Bank officials with HDIL and DHFL. HDIL and DHFL were companies of the same family Wadhawans and action is being taken against them in this matter.

The whistleblower had said in his letter that PMC Bank in connivance with HDIL manipulated its deposits and in return the entire black money of HDIL was shown in the cash deposit of PMC Bank. The information about this increased cash limit was not given to RBI. In this regard, the bank’s NPA was also disclosed.

In this letter, the whistleblower said that the actual NPA of PMC Bank was 9%, but the bank showed it to be only 1%. Also PMC Bank showed a fake deposit of Rs 250 crore in its system. The bank gave a large amount of fresh loans to NPA companies such as DHFL and HDIL.

These loans were given in the name of relatives or partners of the directors of these companies. Then the NPA was settled from this loan. Fake deposits were shown to increase the loan book of the bank. The whistleblower had asked the RBI to investigate the matter.

RBI took cognizance of this letter and on 7 March 2011 ordered an inquiry into the matter to PMC CEO Joy Thomas, who was later arrested in this case.

Investigation revealed that Joy Thomas changed his religion to Junaid Khan to marry a personal assistant and gifted 9 flats to his wife in Pune.

The scam did not come to the fore at that time as the person who was entrusted with the investigation by RBI was himself in connivance with the scamsters and involved in this conspiracy. In addition, in 2018-19, statutory auditors gave an A rating to PMC Bank in their audit classification.

This rating was given at a time when there was massive fraud in the bank.

The role of Auditor Lakdawala and Co is also under investigation in this matter. The auditor could not be contacted in this matter as no website or email of the auditor is available. In this case, the auditors failed to spot the bank’s malpractices and gave it a top rating. Had RBI and auditors done their job properly, this scam could have been prevented.