The Punjab and Maharashtra Cooperative (PMC) Bank, mired in controversy and submerged in bad debt due to the fraudulent act of giving loans more than its capital, is constantly coming up with new disclosures. Now a letter from the former managing director of the bank has come out in which he has given the reason for the bank’s sinking.
PMC MD Joy Thomas has written in a letter to the RBI that the bank used dummy accounts to hide the abnormal number of loans. The total capital of the PMC bank is Rs 1,000 crore whereas a total loan amount of Rs 2,500 crore had been disbursed to Housing Development and Infrastructure Limited. Due to this, the RBI imposed restrictions on the bank for 6 months, which inconvenienced thousands of its customers recently, after which they were given a temporary reprieve.
In the letter to the RBI, Thomas wrote that every year during the RBI inspection, the PMC Bank found itself under deep stress because “we had hidden information”.
In the letter written on 21 September, Thomas said that he too had hidden the truth from the bank’s board and auditors. The PMC bank had overhauled the former management of the bank, including Thomas, last week.
PMC is one of the 97,000 cooperative banks in the country with a capital of $ 130 billion. Of all banks in the country, only 54 are monitored by the RBI.
Investors are facing a different kind of risk as the bad loan ratio in the country is close to 9.3%. It is the highest in the world.
Thomas has stated that he had stopped reporting to the RBI since 2008 because he was concerned about the bank’s reputation. He said that in 2011, the bank’s outstanding on HDIL was Rs 1,020 crore, which was more than half of the total loan of Rs 2,000 crore issued by the bank.
It is to be noted that, according to RBI rules, more than 20% of the total loan issued by a bank cannot be given to any single company.