A year after the fraud case of Punjab & Maharashtra Co-operative Bank (PMC) came to light, depositors of the troubled bank have written to the Reserve Bank of India (RBI) Governor Shaktikanta Das stating that they will witness a second 'Black Diwali' in a row.
The letter stated that the depositors have been left penniless and that they would protest from November 22 to not only highlight the plight of the account holders but also expose the negligence of the banking regulator.
"Despite the passage of the Banking Regulation Act (Amendment 2020), which you (RBI) said is a powerful tool for reconstruction, you have not even responded to the depositors' proposal of merger which is a simple and sure-shot profitable venture for an acquiring bank," the letter stated.
"It seems the RBI is taking its own sweet time while the depositors are dying by the day. This is a continuation of also the lethargy that was shown by the RBI during the last 10 years when it was supposed to inspect and audit PMC Bank in the interest of the depositors."
The letter further mentions that many depositors, including senior citizens, have contemplated suicide due to the harassment in the last few months.
The PMC depositors said that they will undergo a rotational hunger strike for 10 days in front of the central bank and observe an indefinite hunger strike if no resolution is found.
"There are many who have threatened to commit suicide outside RBI itself. We are strongly opposed to any such move and have convinced them that they would definitely get their money. That is the very least we can do to calm them. It is not just your moral and ethical duty, but also your administrative duty to protect the depositors from further trauma. We have outlined our plan and now the ball is in your court," the letter read.
What Is The PMC Scam?
Towards the end of the financial year 2018-19, the total deposits in the PMC bank stood at Rs 11,617 crore and total loans advanced amounted to Rs 8,383 crore. The gross Non-Performing Assets (NPA) settled at 3.76 per cent which was not worrying, keeping in mind the country's overall NPA crisis.
However, hidden in these numbers was a massive financial scam which involved the bank's top management and Housing Development and Infrastructure Ltd. (HDIL).
The fraud came to light when some women employees of the credit department of the bank informed the central bank about thousands of suspicious or ghost accounts. Following the alert, thousands of depositors panicked and decided to withdraw all their money from their accounts.
On September 23, 2019, the central bank imposed restrictions on PMC under Section 35A of the Banking Regulation Act 1949 fora period of six months, setting a withdrawal limit of Rs 1000. The withdrawal limit was later increased to Rs 1,00,000. However, depositors with large amounts in their accounts continue to suffer as they are unable to withdraw money beyond the given limit.
After RBI audited the bank's accounts, the gross NPA increased from 3.76 per cent to 77 per cent, revealing the multi-crore scam.
Details revealed that the management of the bank had given a huge loan to Housing Development and Infrastructure Ltd (HDIL) and its group entities by shifting 70 per cent of the bank's total credit facilities to them.
Nearly 21,049 bank accounts were opened by bogus names to cover 44 loan accounts which remained concealed by tampering with the bank's software.
Loans to the tune of Rs 6,500 crore were channelized through these accounts to the 44 accounts of the HDIL group, which were not disclosed to the central bank.
The Enforcement Directorate (ED)then jumped into action and sealed HDIL's assets worth Rs 3,500 crore and the HDIL chief Rakesh Wadhawan and his son Sarang Wadhawan were arrested. Former PMC Bank MD Joy Thomas was also arrested who accepted that they had hidden the fraud as it would have brought a lot of bad reputation to the bank.
As of now, efforts are still on to recover the money from HDIL.