India

RBI to HC: Inspection report flagged conflict of interest over Waryam Singh

RBI to HC: Inspection report flagged conflict of interest over Waryam Singh

The Reserve Bank of India (RBI) on Tuesday informed the Bombay High Court through an affidavit that it had commented upon the conflict of interest in Waryam Singh being the chairman of the Punjab & Maharashtra Co-operative (PMC) Bank along with being a former director of HDIL Group, in its inspection report.

The affidavit, filed through an assistant general manager of the RBI, stated that its inspection report with respect to the financial position as on March 31, 2018, had further noted the attempt by the bank to show disclosed accounts of HDIL Group as standard by sanctioning new loans to regularise the old non-performing accounts.

“The inspection team had also established the relationship between the chairman of the bank (Singh) and HDIL promoters, which might have acted as the primary consideration for sanction of credit facilities and resulted in their utilisation to pay off one-time settlement dues with other lenders,” the affidavit states.

The RBI said that it was a violation of the RBI’s Master Circular in 2015. “Consequently, the assessed NPAs (non-performing assets) of the bank were significantly higher than the reported NPAs,” the affidavit states.

The HC was Tuesday hearing petitions filed by depositors on grounds including opposing the withdrawal limits set by the RBI to withdraw money from the PMC Bank. The RBI counsel informed the court that the action of issuing directions to PMC Bank and imposing restrictions on its activities was taken in “public interest” and “to avoid further damage to depositors”.

The affidavit also detailed the manner in which the PMC Bank “fraudulently manipulated data” to RBI for sample checks by adding 21,049 fictitious loan accounts, while excluding HDIL-related accounts to camouflage large-scale financial irregularities.

Due to this, the RBI claims, “what was noted was flagged, but not observed to be impacting the financial health of the bank in any significant manner”.

It said that to mitigate the hardship of the depositors, the RBI had also enabled entertaining, on merit, any application for withdrawal beyond the stipulated amount of Rs 50,000 on ground of hardship grounds, like medical treatment, marriage, education and livelihood of an amount up to Rs 1 lakh, and Rs 50,000 for others.

It also said that the RBI is undertaking the process of evaluating the securities or collateral lodged by HDIL Group to auction them as per law. It claimed that with the latest relaxation on withdrawals of Rs 50,000 effective from November 5, at least 78 per cent of the bank’s depositors can withdraw their entire account balance.

The RBI counsel also told the court that applications for seeking withdrawals beyond the limit can be made to the RBI-appointed administrator.

The affidavit also gave a detail of the modus operandi of the PMC Bank in hiding the information related to HDIL Group by tampering with the management information system software installed in the bank and states that sanction of loans to the group was not mentioned in the meetings of the loan committee and board of directors.

The court has adjourned the hearings in the matter to December 4. Meanwhile, several depositors had gathered outside the High Court premises to protest against the RBI imposed withdrawal limit.