The beleaguered Punjab and Maharashtra Co-operative (PMC) Bank officials agreed that a bad debt of ₹2,500 crore to real estate developer HDIL has led the bank to the current crisis.
HDIL loan eventually turned into a non-performing asset (NPA) which led the bank to an inescapable deadlock. The ₹2,500-crore exposure to the HDIL Group works out to about 30 per cent of the bank’s total advances which is against the RBI’s directive. The disclosure about HDIL exposure raises questions about the effectiveness of central bank inspections.
One of the reasons for the RBI action is the highly under-reported HDIL non-performing assets (NPAs), which according to sources are in high double-digits, while as per its FY19 balance sheet, it stood at a low 2.19 percent, which though was more than double of 1.05 percent in FY18.
Thomas admitted that the problem rose because of under-reporting of NPAs from the HDIL account. HDIL, the slum redevelopment company has landed in cash crunch, has already gone to the bankruptcy now, has been delaying payments for the past few years.
“The loans that were granted by us were not reported during the last six-seven years…We ourselves went to the RBI on September 19 and apprised the Executive Director of our situation and asked for some time to regularise the loans,” he added.
“The exposure that we reported to the RBI was to the HDIL Group….We have only exceeded the exposure norm, for which we have asked for a resolution plan,” Thomas said at a press conference in Mumbai.
Thomas said that if the exposure had been reported, it would have triggered a run on the bank. “That was why we sought time and a resolution plan; the (RBI) ED agreed to conduct a normal inspection... The next day (September 20), the inspecting officers collected all the information…but on September 23, we got the (direction),” said Thomas.
He felt that the RBI inspection could have determined the bank’s liquidity position better, but its action had harmed depositors. “There was sufficient liquidity: they have increased the withdrawal limit to ₹10,000. Now I am told they plan to increase it to ₹1 lakh. It was a hasty decision that harmed the organisation,” he said.