PMC Bank has over 136 branches in six states and 21 lakh account holders. (File Photo)
The Economic Offences Wing (EOW) of the Mumbai Police that is investigating the Rs 4,355-crore PMC Bank scam has found that apart from not reporting unpaid loans by Housing Development and Infrastructure Limited (HDIL), the bank management only sought a “minimal collateral” for the nearly Rs 2,000-crore overdraft facility it provided to the company between 2008 to 2017.
Eventually, the bank gave overdraft facility worth around Rs 2,500 crore to HDIL and by the time the alleged fraud was unearthed in October, HDIL owed the bank Rs 4,355 crore, including the interest accrued.
It was only in 2017, when Joy Thomas — the former MD of the bank who has been arrested in the case — realised that HDIL promoters Rakesh and Sarang Wadhawan were not paying the money that he asked them to provide as further collateral in the form movable and immovable assets, said police.
Some of the movable assets of the Wadhawans, believed to be a worth a few hundred crores, are likely to be auctioned once the Enforcement Directorate (ED) — it is probing the money laundering trail in the case — tells the special court on Friday that it has no problem with the auction.
Among the assets that are likely to be auctioned include properties and land plots in Vasai, Virar and Nala Sopara. Movable assets include two nine-seater planes, one speed boat, three luxury cars and three all-terrain bikes among others. While the immovable assets are believed to be worth a few hundred crores, the total value is expected to yield over Rs 4,000 crore, an EOW officer said.
The officer added that during questioning, Sarang Wadhawan had said that till 2017, they had only provided a “minimum collateral” to the bank even as they were provided over Rs 2000-crore of overdraft facility. It was only when they were unable to repay the money that Thomas asked them to provide collateral for the overdraft facility given to them.
The officer said that while there were no fixed guidelines about how much collateral should be kept, usually, keeping collateral worth the value of the loan or once or twice the loan amount is considered to be a good banking practise.
Usually, cooperative banks have two or three major depositors, who transact in large sums that helps the bank manage its overall finances. In the case of PMC, Wadhawans had been one of its biggest clients and hence, Thomas was keen that they continue with the bank, the officer explained.
“During interrogation, Thomas said they offered loans to Wadhawans and did not make public the bulging unpaid loans over the years, as he believed they would eventually pay up as they were one of PMC’s most important clients... Thomas has claimed that it was with the aim of ensuring that the bank continued to function that he allegedly did not bring the unpaid loans to light and not for any monetary gains,” said the officer.
The investigators are, however, are waiting for the final report of forensic auditing firm Grant Thornton — expected in a week — to shed light on financial transactions related to the bank.
PMC Bank has over 136 branches in six states and 21 lakh account holders. So far nine persons who had accounts in the bank have died after the scam came to light and restrictions were imposed by the RBI. Nine arrests have also been made in the case, including the Wadhawans, Thomas, three auditors and son of former BJP MLA Sardar Tara Singh, who was a director of the bank and a member of the loan recovery committee.