Case Study and Analysis on PMC Bank Fraud with timeline and verdict.

1. PMC Bank
Fraud

2. About PMC Bank
• Punjab and Maharashtra cooperative
bank was founded in 1984,
• Punjab and Maharashtra cooperative
is a multi state scheduled state co-operative
bank with its area of operation in Maharashtra,,
Delhi, Karnataka, Goa, Gujrat, Andhra Pradesh
and Madhya Pradesh.
• PMC Bank expanded to 137
branches in span of 35 years.
• Its customers include small
businesses, housing societies and institutions.

3. Nature
● The Enforcement Directorate has filed a
money laundering case in the PMC Bank
scam.
● Alleged irregularities in certain loan
accounts.
● Loans given to financially stressed real
estate player Housing Development &
Infrastructure (HDIL) are at the centre of
the investigation.

4. What happened?
● According to an FIR filed, HDIL promoters allegedly colluded with the bank
management to draw loans from the bank's Bhandup branch.
● The bank officials did not classify these loans as NPAs, despite non-payment.

5. ● Reports estimate the bank’s overall exposure to the HDIL group at around Rs
6,500 crore(over 73 %)of all of the bank’s advances.
● The bank allegedly created fictitious accounts of companies which borrowed
small sums of money, and created fake reports to hide from regulatory
supervision. The bank software was also tampered to conceal those accounts.

6. 2017
RBI Started digging deeper and
investigating more into the
records presented by PMC
2011
Loan granted to HDIL group
reached upto hefty Rs. 1900 cr,
which was almost 50 percent of
the total Loan that PMC granted
2008
HDIL loan accounts was not
reported as NPAs even though
many senior management were
aware
2004
Rajesh Wadhawan, promoter of
HDIL deposited 100 cr. to help
save PMC from Liquidity problem

7. Aug 2020
RBI permitted withdrawal of up to
Rs five lakh on hardship grounds
for treatment of critical life-
threatening ailments
Mar 2020
RBI also told the court that the
insurance cover of Rs 5 lakh to
each depositor would be
applicable only on cancellation of
license of the bank
Oct 2020
12 arrests were made including
Rakesh Wadhawan, Sarang
Wadhawan, Joy Thomas, Waryam
Singh and other senior directors
Sept 2019
Police's Economic Offences Wing
registered a case against the
former bank management and
promoters of HDIL

8. Blame/ Acceptance
● Joy Thomas,former MD of PMC wrote an open letter of confession to RBI in
2019. He feared there was no way of recovery.
● He wrote that by 2011 the bank had about 1000 crore loan provided to HDIL.
Except the few who knew were part of the senior management, he confessed
that they tried to cover up the irregularities from auditors and RBI.

9. Analysis
● After collapsing of PMC, entire burden was placed on the door of innocent
depositors. Many suicides and heart attacks were reported in the country when
the scam came to light.
● RBI is now more stringent towards Urban Cooperative Banks (UCBs) to
safeguard the interest of depositors.
● The Apex Bank asked UCBs to replace the existing system of e-mail reporting at
the branches.
● In addition to this, Central Bank asked them to constitute a Board of
Management (BoM) as per the guidelines.

10. Some Examples
● Madhavpura Mercantile Co-operative
Bank Scam happened in 2001.
● Late Mr. Rishi Kapoor compared PMC crisis
with his father movie “Shree 420”.

11. THANK YOU