Rs 2500-cr loan to HDIL behind PMC bank crisis: Report

Punjab & Maharashtra Cooperative (PMC) Bank's Rs 2,500 crore exposure to the bankrupt real estate firm Housing Development and Infrastructure Limited (HDIL) seems to be one of the biggest reasons behind RBI's move to put a slew of restrictions on the bank, according to a report by Mumbai Mirror.

The RBI on September 24 barred the Mumbai-based bank from carrying out a majority of its routine business transactions for a period of six months.

According to the RBI Directions, depositors are allowed to withdraw a sum not exceeding ₹1,000 of the total balance in every savings bank account or current account or any other deposit account by whatever name called, subject to conditions stipulated in the RBI directions.

The newspaper report stated that the PMC Bank’s auditors did not classify the loan to HDIL as an NPA despite the firm defaulting on repayments. The RBI had later termed the loan as a “complete loss”.

“The RBI guidelines in such cases say that the bank must make a provision for the loss. The PMC Bank’s cash reserves stand at around Rs 1,000 crore, well short of the Rs 2,500 crore loan granted to the HDIL,” a source told the newspaper.

Also read — Chaos among depositors as PMC Bank in crisis

As per the bank’s annual report, its net profit declined marginally 1.2% to Rs 99.69 crore for the year to March 2019, while its net NPAs more than doubled to 2.19% from
1.05%.

The RBI was convinced that the loan to HDIL will have to be completely written off, according to the report. “In case the RBI felt that the loan was not a complete loss, the PMC Bank would have to make provision for 10% of the total loan, for which it had the resources. The fact that the RBI has put severe restrictions on the bank is proof enough that it considers the
entire loan to HDIL as NPA,” the source said.

Also read — PMC Bank chief expresses regret

The RBI move, however, left depositors in chaos and confusion outside the branches of the bank in Mumbai as they rushed to the bank to get their money back.