PMC bank: The story of a scam foretold

This is not the first time irregularities in Punjab Maharashtra Cooperative PMC Bank were brought to the Reserve Bank of Indias notice with no action taken FounderChairman Sardar Gurucharan Kochhar had flagged irregularities running to over a crore in 1993 but his concerns were swept under the carpetHad RBI taken stringent action then a strong message would have gone to bank staff and we wouldnt have this scam today said Charan Singh 74 a founderdirector In the complaint Kochhar who was not the chairman in 1993 had stated that for nearly two years he had asked the new board of directors to furnish details of balances in current saving and loan accounts but the then General Manager now disgraced MD Joy Thomas delayed disclosing the detailsKochhars son Amarjit 57 said Only because that case was kept under wraps the board of directors dared commit financial irregularities to the tune of over Rs 6500 crore today Kochhar had observed that the Bank violated a series of byelaws RBI guidelines and the Maharashtra State Cooperative Society Act in disbursing funds over Rs 1 croreAmarjeet Singh with the photo of his father the late Sardar Gurucharan SinghThomas admitted to Kochhar that there were defaults and promised to recover the amount granted without the approval of the Board of Directors within three monthsInterestingly even now Thomas in his confessional statement admitted that he was responsible for sanctioning nearly 73 per cent of the banks total loans mdash over Rs 6500 crore mdash to HDIL without approvals And this according to both Singh and Amarjit was a deliberate attempt by the present chairman and board of directors to make Thomas the scapegoat Even in 1993 Thomas took the blame for the acts of the then chairman and board of directors they saidWhile it is no excuse for him Thomas is surely being forced to own up in the current scam said Singh He was the GM since 1987 and he grew within the bank Directors and account holders always trusted him as their own family member Eventually the board handed over the required information to Kochhar in May 4 1993 A recovery committee was formed and Kochhar submitted a detailed report on September 11 1993 to the chairman and board The chairman promised to take stern action against executive staff and directors involved but did nothingAmarjeet Singh Kochhar and Charan SinghFinally Kochhar requested government auditors to verify his claims See box and wanted to move court for criminal breach of trust against the directors and the executive staff He also wanted the Bank to be prevented from incurring unusually heavy expenditures till the finalisation of his application But other than summons from the Crime Branch asking me to be present for recording my statement since I was also a signatory to the complaint the police took no action said AmarjitSingh added Five senior Sikh community members of good standing intervened and yet they managed to ensure that the matter was never brought to public notice No account holder ever learnt of what happened Amarjit said the fact that Rs 20000 was spent on lunch with RBI auditors raises serious questions especially since no action was takenTimely action then would have helped avert this major multicrore scam he said Singh ended on a hopeful note Even now the bank is financially sound Out of the 137 branches it owns the property housing nearly 100 branches If the RBI allows the Bank to operate under an administrator it will bounce back toits glory73Per cent of total loans of PMC Bank sanctioned to HDIL R6500 cr without permissions from boardHumble rootsAmarjit said Kochhar moved to Sion in 1962 after retiring from the IAF and started driving a taxi Getting bank loans was difficult for taxi drivers in those days he said Since my father was into social work he approached UCO Bank in Worli and convinced them to allot loans for 250 taxi drivers When it came time to repay only 10 defaulted Singh added that in 1983 Kochhar mooted the idea of starting a bank for taxi drivers and asked him to become a Director We got an RBI licence and started the bank on February 13 1984 said Singh On the very first day we got deposits from gurudwaras temples and wealthy Sikhs who deposited nearly Rs 40 lakh It was a bank started by taxi drivers to help those from the lower strata to get financial aide and then gradually expanded over the yearsWhat went wrong in 1993According to Kochhars complainta Loans of up to Rs 50 lakh can only be given to members of the bank GM Joy Thomas without the boards approval or even an application released disproportionate funds to an entity called Ms Atul Reality Pvt Ltdb Thomas also allowed heavy overdraft to several current accounts without permissions Nine current account holders were given overdraft facilities ranging from Rs 46000 to Rs 540000 While in certain cases the limit was against FDs in reality no FD receipts were pledgedc Vehicle personal and other loan documents were incomplete or did not meet requisite conditions before disbursement In most cases installments up to 30 years were allowed to lapse and no legal action was taken for recoveryd Only four directors were given loans and when other directors applied they were kept pending The GM also tried to regularise unsanctioned loans the powers of the board were concentrated in hands of the Chairman and GMe the GM was unable to explain unusual expenditure like Rs 20259 on a lunch with RBI auditors and Rs 6973 for purchase of articles for guests Besides the total expenditure visagravevis the TDL and capital of the bank does not matchCatch up on all the latest Crime National International and Hatke news here Also download the new midday Android and iOS apps to get latest updates