The collapse of PMC Bank has left the Indian banking sector with many questions over its regulatory framework, audit reports and the vigilance of RBI. Punjab & Maharashtra Co-operative Bank Ltd (PMC Bank) is one of the largest co-operative banks in the country with a total deposit of 11,000 crore rupees and is on the verge of bankruptcy.
The Wadhawan family (main culprits of the scam), which has a controlling stake in PMC Bank, placed its people in the management of PMC and siphoned off 73 percent of total deposits as loans. The person who helped the Wadhwans in PMC scam is its former Managing Director Joy Thomas aka Junaid Khan.
The story of Thomas is akin to shady villains in Bollywood stories. He lived a double life, one of Joy Thomas and another of Junaid Khan. While at PMC Bank, Thomas had a relationship with his assistant. In order to marry his PA, Thomas changed his religion to marry his second wife. Having more than one wife is allowed in Islamic personal law and, for that reason Thomas converted to Islam.
Thomas married his second wife in 2005 and relocated her to Pune. “Thomas was married and had a family, yet developed a relationship with his PA. In 2005, she quit her job saying she was getting married and shifting to Dubai. That was the last anyone in the bank heard of her,” said an officer.
Since 2005, Thomas divided his life between Mumbai and Pune. He kept his family in Mumbai aloof about his second wife and children from her. Thomas’s first wife had filed a case for divorce after she came to know about his dual life, and proceedings for the same are in final stages.
It is suspected that Thomas siphoned off money from the banks and bought nearly ten properties jointly with his second wife. Thomas purchased ten properties in Pune after 2012. These properties are jointly owned by the couple and source of income for the purchase is yet to be ascertained. The total value of properties is estimated to be around 4-5 crore rupees. Property rent is a major source of income for Thomas’s second who lives in Pune with her two children. Thomas adopted a girl who is now 11 years old, with his second wife. His second wife draws rent from Pune properties. They also have a 10-year-old son.
“The properties are jointly owned by Thomas and his second wife and we are yet to find out the share percentage of ownership of the ten properties. As it is jointly owned, the attachment could be difficult but if we can prove those bought from the proceeds of crime then we can initiate proceedings and attach these properties,” said an investigating officer. “Besides the ten properties, Thomas also owns a flat in Thane and a commercial property which is under the control of his son from his first wife,” added the officer.
As per the Economic Offences Wing (EOW) of Maharashtra Police, which is investigating the case, Wadhwans started non-payment of loans and additional borrowing after 2012. Thomas was arrested in the case on October 4 and remanded to police custody till October 17.
PMC bank is a classic case of how shadow banks, with limited or no regulation, could be involved in such a large scale corruption. A few weeks ago, PMC bank looked in a very healthy financial position with 4 percent NPA and 12 percent Credit Adequacy Ratio. But, the NPA of the bank suddenly rose from 4 percent to 77 percent with just one disclosure.
The Wadhawan family has been associated with the PMC bank since the mid-1980s and rescued it from bankruptcy many times in the 1990s and early 2000s. But the growing influence of Wadhawans over PMC resulted in almost 60 percent of the bank’s total business happening with the group.
When HDIL went bankrupt due to the failure of its projects, the direct influence of this was witnessed in the rise in NPA of PMC Bank. Today, almost all money of depositors is at stake given HDIL’s inability to pay back.
The PMC case raises valid questions over RBI’s regulatory capabilities and accountancy practices in the country as the PMC fraud culminated in the last six to seven years but in annual audit reports, everything seemed fine. This has much to do with the interesting dual life of Joy Thomas aka Junaid Khan, who converted not only to have a second wife but to siphon large sums from the PMC bank and the culmination of this corruption has landed thousands of people on the streets.