PMC bank scam: Probe role of PMC's auditors, say depositors

Updated: Oct 12, 2019, 08:36 IST | Vinod Kumar Menon | Mumbai

Account holders want strict action to be taken against internal, external and RBI auditors who studied the books of the PMC bank since 2008

Customers hit the streets to protest against RBI's inaction in the PMC Bank scam. File pic
Customers hit the streets to protest against RBI's inaction in the PMC Bank scam. File pic

While the law is supposedly taking its course and PMC Bank's top managers are in the slammer, account holders are wondering how such a massive scam escaped the eagle eye of internal, external and even RBI auditors. They said the role of these auditors is crucial and investigators should not ignore their culpability.

Speaking to mid-day, Amarjit Singh Kochhar, former director of the bank said, "It is not only Joy Thomas, who played a crucial role in duping 16 lakh customers of the bank, but it was also the responsibility of internal, external and RBI auditors who were managing the bank's audit work, to report the wrong doings." He added, "The EOW claimed that during their course of investigation they learnt that the systematic scam and fake accounts were being created since 2008. It has almost been 11 years since then and it's very difficult to believe that none of the auditors managed to smell the rat, or was it that these people were working in connivance with the PMC Bank board in looting the hard-earned money of citizens." He further said that the probe agency should check records of the inter-state branches as well as this might just be the tip of the iceberg.

'Turned a blind eye'
Requesting anonymity, an investor said, "We understand that the internal auditors might have overlooked the forged documents but the external and RBI ones, who are otherwise supposed to look for entries that the internal auditors might have skipped due to oversight, too turned a blind eye." Mentioning that this is not the first time that irregularities have been brought to the fore, Kochhar said, "My father Sardar Gurucharan Kochhar, who was the founder chairman of the bank, had in his complaint to RBI in 1993 questioned the role of auditors as the bank had spent R20,000 only for the lunch of RBI auditors. As the matter was never investigated, they dared to commit a larger scam."

A practising charted accountant said, "Usually the auditors make a 'qualification remark' while auditing the bank's books of accounts when they come across any account which is getting over 10 to 15 per cent of their deposits as advances. And when such a remark is not made or ignored, it is called a camouflage entry."

The CA added, "The role of the internal, external and even RBI auditors is very crucial and it should be investigated since 2008." He further said that the agencies should probe the bank's accounting software and how it was manipulated to create the fake accounts. Earlier, Minister for Cooperation Subhash Sureshchandra Deshmukh had told mid-day about the hardships the bank customers were facing due to RBI's action. He had said, "Since PMC is a multi-state scheduled urban cooperative bank, the state cooperation department has no direct control over it. The bank comes under the ambit of the Central Registrar of Co-operative Societies, New Delhi. I have already directed the State Registrar of Cooperative Societies to write a detailed note to the Central Registrar to intervene in the matter and take appropriate action." However, he had a word of caution for account holders that they should play a more proactive role than just depositing and withdrawing money from their accounts.

'Auditors are liable'
Speaking to mid-day, Advocate Vinod Sampat said, "The auditors are financially liable if they haven't acted in good faith. They should be extra cautious whenever there are boom entries, as there is every possibility of a fraud being committed. Particularly when the same involves entries of thousands of bogus account holders, which itself is a clear case of negligence on part of the bank's senior management and auditors, who are the eyes and ears of the stakeholders. In my view the auditors should be punished harshly so that the others realise that they should discharge their duties in true letter and spirit than just pleasing the top management."

'Action will be taken'
A senior police officer said, "We are probing the case from every possible angle. We will be questioning and recording statements as the investigation progresses and appropriate action under the law will be taken against all those found guilty." Confirming the same, Joint Commissioner of Police (EOW), Rajvardhan Sinha said, "It is too early to say anything about the auditors' role as the investigation is underway. As and when the investigating officer finds it appropriate, people concerned will be called for questioning and a fair probe will be conducted."

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