PMC Bank’s actual exposure to HDIL at 73% of total loan book: Ex-MD Thomas in letter to RBI

PMC Bank's actual exposure to HDIL at 73% of total loan book: Ex-MD Thomas in letter to RBI

Joy Thomas, who has been suspended as the managing director of Punjab and Maharashtra Co-operative Bank (PMC), has reportedly told the RBI that the bank’s actual exposure to the bankrupt HDIL stood at over Rs 6,500 crore – four times the regulatory cap or 73 per cent of its entire assets of Rs 8,880 crore.

He made this revelation before the Reserve Bank of India (RBI) after a board member leaked the actual balance sheet details to the central bank, a source close to the development told news agency PTI.

“Thomas in the letter admitted that the exposure to HDIL Group was over Rs 6,500 crore, which is nearly 73 per cent of its total loan book of Rs 8,880 crore as of September 19, 2019,” the source said.

The debt-laden Housing Development and Infrastructure (HDIL) is facing insolvency proceedings under the provisions of the Insolvency and Bankruptcy Code (IBC) after being hit by a severe cash crunch following the failure of some of its key projects in the city. The company is facing insolvency petitions filed by Bank of India, Corporation Bank, Syndicate Bank, Indian Bank, and Dena Bank among other lenders.

The source said that non-disclosure of the actual HDIL status (NPA since the past two-three years) and the quantum of the exposure to the group was leaked by one of the PMC board members himself to the Reserve Bank, forcing Joy Thomas to confess the misreporting, reported PTI.

According to the source, Thomas wrote a four-and-a-half page detailed letter to the regulator giving details of how he, along with six key people who include a few board members, including chairman Waryam Singh and one or two senior bank officials, were sanctioning loans to the HDIL Group.

The source further added the suspended PMC Bank’s MD has also confessed that most of the board members were unaware about these loans, adding that the loans were sanctioned to the realty developer since 2008.

“The whistleblower board member approached the regulator and provided information about financial irregularities and the real estate company’s loans not being classified as non-performing loans from last two-three years, despite defaults on repayments,” the source told PTI.

“This forced Thomas to go the RBI. In a four-and-a-half page letter, he confessed the wrongdoings and evergreening of some other key accounts,” he added.

Thomas, in a press conference on Friday, admitted that the bank hid information regarding its bad loans to bankrupt real estate company HDIL. He had said the breach in exposure limit to the RBI was not reported for about six-seven years. He said loans granted by the bank were not classified as none-performing assets to avoid the RBI action, and that it would have hampered the bank’s growth. He had said the bank didn’t report the matter to the RBI even though repayment from HDIL was irregular for the past three-four years because it held security, which was worth twice the loan amount.

On September 23, the RBI had imposed regulatory restrictions on the PMC Bank for six months. The withdrawal limit for account holders was also kept at Rs 1,000 for six months, which was later raised to Rs 10,000.