Mumbai: Did PMC lie to RBI or hide loan defaults?

Suspended MD of PMC bank, Joy Thomas speaks to the media on Friday. Pic/ Ashish Raje

Even as customers of Punjab and Maharashtra Co-Operative Bank (PMC) continue to live a nightmare, managing director of the bank, Joy Thomas, who is currently under suspension, faced the media on Friday, accepting that the present situation was a result of PMC's actions. He said the bank had approached the Reserve Bank of India (RBI) on September 19 to seek help to regularise loans worth Rs 2,500 crore unclassified for the past seven years. Following this, the RBI put the bank under restrictions, suspended the board and placed an administrator.

Loan default

Now the question arises whether PMC kept the loan default a secret on purpose or whether they lied about it. Speaking at the press meet, Thomas said the loans weren't classified because highlighting them could have created problems for the bank's business and growth and would have led to chaos among depositors. Despite this, the PMC management claimed the depositors' money was safe as the bank had enough securities and assets.

Thomas added, "We approached the RBI with the expectation that they would show us a way to resolve this problem. Our intention was never to bother the customers. On September 20, RBI officials visited for inspections and on September 23 they put us under restrictions. All of it came as a shock to us as well. Even as the HDIL and its various groups had crossed the exposure limit, we had back up in terms of securities from the company, which was 200 per cent more than their outstanding and interest. Yet the regulatory body took such a strict decision."

Lack of cash

Speaking about the RBI increasing the withdrawal limit to Rs 10,000, Thomas said, "Within two days they increased the limit to Rs 10,000. We came to know about it late Thursday night, and it takes time to route that much of cash. And now we hear it will be further increased to Rs 1 lakh. This shows that the decision was taken in haste and there seems to be some kind of conspiracy behind it. The RBI should have planned this properly."

Reacting to questions whether the default was hidden or they lied to the regulatory body, he said that the loans were not classified over the years fearing chaos over the issue, which otherwise could have been averted given the assets and liquidity.

"I can't comment on how the RBI did not notice the irregularity earlier, as it is for them to answer, but we are not blaming them. We are just worried about the method they are using to resolve it."

Also Read: RBI increases withdrawal limit from Rs 1,000 to 10,000 for PMC Bank customers

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