Co-operatives’ Federation on PMC Bank

The National Federation of Urban Co-operative Banks and Credit Societies (NAFCUB) has requested Reserve Bank of India, to make their best efforts in recovering the dues from major defaulters of such NPAs (Non Performing Assets) of PMC Bank (Punjab and Maharashtra Co-operative Bank).

1. The Federation wants that the guilty should be punished and the public confidence on Co-operative Banks and Co-operative Sectors should be restored which has been brought to a pathetic situation today. They felt that such a stringent action alone would restore public confidence.
2. In the past Madhavpura (Mercantile Co-operative Bank) was a past story dating back to over two decades before, which is still daunting the memories of the public.
3. The HDIL group which had availed from PMC Bank, had defaulted in payment and the bank’s exposure to the said group was reported as Standard Asset inspite of the loan not being serviced for over 2-3 years.
4. The bank’s exposure to the HDIL Realty group is said to be around Rs. 6500 crores which accounted for over 73% of its total loan book.
5. With effect from close of its business on 23^rd September 2019 RBI had placed PMC bank under directions for six months which restricted withdrawal of money from any account and also stopping the bank from granting any loans and advances and also any further investments.
6. RBI has added that these restrictions were necessitated due to
   1. Major financial irregularities observed in the bank’s affairs
   2. Failure of internal control and systems of the bank
   3. Wrong/Under reporting of the bank’s exposure under various off-site surveillance reports to RBI which was brought to notice recently.
7. NAFCUB has suggested that at this stage the RBI and the Agriculture Ministry (which is the controlling ministry for multi-State co-operative societies) along with Finance Ministry and Federation and other stake holders should meet immediately and take stock of the situation to ensure possible recoveries of the largest NPAs of the bank in the quickest possible time and work out other measures for recovery if regular measures do not work.
8. It is also learnt, that the concealment of facts from Board, Auditors and regulators was due to the fear of reputational loss and till 2019 some of the accounts were reported, however, many legacy accounts were not reported to the board.
9. Also the bank’s former MD in his letter to RBI has informed that the stressed legacy accounts belonging to HDIl group were replaced with dummy account to match the outstanding balances in the balance sheet.
10. Also it is learnt that since the loans in the balance sheet were mentioned to be loans against deposits, and were of lower amounts, they were never checked by RBI.