PMC crisis: HDIL directors Rakesh and Sarang Wadhawan arrested

A day after Punjab and Maharashtra Cooperative (PMC) Bank’s suspended managing director Joy Thomas blamed auditors for the crisis where numerous Non-Performing Assets (NPA) by the were under-reported, two Housing Development and Infrastructure Limited (HDIL) directors, Rakesh Wadhawan and Sarang Wadhawan, have been arrested by the Mumbai Police’s Economic Offender’s Wing.

HDIL, which was declared insolvent in August, was accused by Thomas of hiding its NPAs with PMC through the use of 21,049 dummy accounts. Rakesh, the executive chairman of HDIL, and his son Sarang, its managing director, were both arrested on Thursday, with assets worth Rs 3,500 crore frozen.

In the FIR against PMC, the bank was estimated to have loses of Rs 4,355.46 crore since 2008. Among the top ten cooperative banks in India, PMC had deposits of Rs 11,617 crore and advances of Rs 8,383 by the end of March 2019.

The bank had reportedly hidden the extent of its NPAs, something that auditors did not spot but that the RBI did. The companies it funded including many in real estate, with HDIL the leading one. PMC had issued loans to HDIL even after other banks dclared the company a defaulter.

On September 24, the RBI announced that its depositors would not be allowed to withdraw amounts exceeding Rs 1,000. In addition, the bank was barred from issuing or renewing loans, advances; making investments, or incurring any liabilities including borrowing funds or accepting fresh deposits.

For customers, deposits of up to Rs one lakh were covetred under the Deposit Insurance and Credit Guarantee Corporation (CIDGC).

On Septembre 27, the withdrawal limit per customer was raised to Rs 10,000.