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PMC Bank Crisis

About PMC Bank: Punjab and Again in 2004, Rakesh’s elder brother Rajesh
Maharashtra Cooperative Bank Wadhawan deposited more than 100 crores to help
founded in 1984, has 137 the bank tide over the liquidity crunch. After that
branches across seven states, 81 HDIL started banking with PMC and more than
of these in Mumbai,Navi 60% transactions of bank were from this group.
Mumbai, Thane, Palghar After HDIL became a listed company in 2007, it
regions, 10 in Pune and 12 in the cleared all the dues of PMC and moved on to other
Kirti Nandrekar rest of Maharashtra. Its banks as its requirements of capital had become
customers include small businesses, housing manifold.
societies and institutions.
Later, PMC bank approached and requested HDIL
Punjab and Maharashtra Cooperative Bank to continue banking with it as it has started
(PMC Bank) has been facing regulatory actions impacting profitability of bank, as a huge portion of
and investigation over alleged irregularities in advances were repaid by the company. So, HDIL
certain loan accounts. Loans given to financially again started their operations with bank after 5-6
stressed real estate player Housing Development & months.
Infrastructure (HDIL) are at the centre of the
In 2011-2013, the infrastructure developer suffered
investigation.
a series of setbacks at their projects, and started
On September 24, 2019, the Reserve Bank of India facing liquidity crunch, hence defaulting on” all
(RBI) placed restraints on the activities of the dues of all the banks”.
Mumbai-based bank for six months. The central
As the loans outstanding were huge and if these
bank also limited the amount a customer could
were classified as NPA it would have affected the
withdraw from their account during the next six
profitability of the bank, it would face regulatory
months - from Rs 1,000 at first, and later to Rs
action from RBI. Also the bank continued to report
25,000.
all accounts as standard accounts, though some of
The Enforcement Directorate has filed a money the accounts were not performing well. This was
laundering case in the PMC Bank scam. not brought to the notice of the board. The
According to the bank’s 2018-19 annual report, subsequent over dues of various loans were also not
PMC’s percentage of gross NPA to gross advances reported to the board.
is 3.76 % while net NPA to net advances is 2.19%
for the year ended March 31. The total deposits
stand at Rs 11,617.34 crore.

The letter states that the stressed legacy accounts
belonging to HDIL group were replaced with
dummy accounts to match the outstanding balances
in the balance sheet. While the loans were
mentioned as loans against depositors and were of
lower amounts, they were not checked by the RBI.
HDIL-PMC Bank History PMC Bank
relationship with HDIL started in 1986-87 when the
bank had come on the state of closure due to some
“unlawful deeds of some of the borrowers”, at that
time Rakesh Wadhawan (present director of HDIL) Since the bank was growing, statutory auditors, due
and many other companies run by Deewan family to their time constraints checked only the
came to the rescue of the bank. They invested incremental advances, and not the entire operations
capital and saved the bank. in the account. They scrutinised the accounts which

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