Punjab and

Maharashtra
Co-operative
bank scam

By Akansha Biswas & Mannat Chawla

 01
Intro to co- 04
operative Bank Recent
DEvelopments
02
Punjab and 05
Index Maharashtra Co- Media
operative Bank Coverage
03
PMC Scam 06
Bibliography
 What is a co-operative Bank
Co-operative banks are where members of a
community come together on a cooperative basis to
deal in ordinary banking operations of depositing and
lending money to each other. Similar to other banks,
co-operative banks accept deposits and extend loans
to members as well as non-members.
 Difference between Co-operative and Commercial banks

● Cooperative banks issue shares of unlimited liability, while the joint stock banks issue shares
of limited liability.
● In a cooperative bank, one shareholder has one vote whatever the number of shares he may
hold. In a joint stock bank, the voting right of a shareholder is determined by the number of
shares he possesses.
● Cooperative banks are generally concerned with the rural credit and provide financial
assistance for agricultural and rural activities. Joint stock companies are primarily concerned
with the credit requirements of trade and industry.
● Cooperative banking in India is federal in structure. Primary credit societies are at the lowest
rung. Then, there are central cooperative banks at the district level and state cooperative
banks at the state level. Joint stock banks do not have such a federal structure.
● Cooperative credit societies are located in the villages spread over entire country. Joint stock
banks and their branches mainly concentrate in the urban areas, particularly in the big cities
 ● Established on February 13, 1984 as a single
branch cooperative.
● Reached a wide network of 137 branches

Punjab and across six states within a period of 35 years.

● Area of operation- Maharashtra, Gujarat,

Maharashtra
Delhi, Goa, Karnataka, Madhya Pradesh and
Andhra Pradesh.
● Is amongst the top 10 co-operative banks in
Co-operative the country with 1814 employees.
● In the year 2000, PMC got the status of
Bank Scheduled Commercial Bank by the the
Reserve Bank of India - the youngest bank
to achieve the ‘Scheduled Bank’ status.
 ● CRUX - Huge loans granted to
Housing Development and
Infrastructure Ltd (HDIL) and its

PMC
group entities by the higher
management of the PMC bank.
● The case is related to transfer of
70% of the total credit facilitates

fraud of PMC Bank to HDIL and

associated companies.
● Total amount of the bank fraud-
Rs4,355.43crore
● Total Non Performing Assets of the
bank has now grown to 73%.
 ● 1986-87 - PMC Bank’s relationship
with HDIL started
● 2004-HDIL deposited more than Rs

Timeline
100 crore to help the bank tide over
the liquidity crunch.
● 2007-HDIL became a listed company,
it cleared all the dues of PMC and
moved on to other banks
● 2011-2013-HDIL suffered a series of
setbacks as their projects and
started facing liquidity crunch and
started defaulting on “all dues of all
banks”.
● 2019-70% loss of credit facilities of
PMC to HDIL
● The PMC Bank’s relationship with HDIL - started
in 1986-87 when the bank had come on the
brink of closure.
● At that time, Rakesh Wadhawan (present
director of HDIL) came to the rescue of the
bank- They infused capital and saved the bank.
● In 2004, Rakesh’s elder brother Rajesh
Wadhawan deposited more than Rs 100 crore to
help the bank tide over the liquidity crunch.
● After that HDIL started banking with PMC, more
than 60 per cent transactions of the bank were
from this group.
● After HDIL became a listed company in 2007, it
cleared all the dues of PMC and moved on to
other banks as its requirements of the capital
had become manifold.
● The Bank requested HDIL to continue
banking with it as it had started impacting
the profitability of the bank as a huge
portion of advances were repaid by the
company.
● As a result, HDIL again started their
operations with the PMC Bank
● Between 2011 and 2013, the infrastructure
developer suffered a series of setbacks and
started defaulting on “all dues of all
banks”.
● With huge outstanding loan amounts
classifying as NPA, profitability of the bank
would have been affected. It continued to
report all accounts as standard accounts.
● Accounts not performing well were not
brought to the notice of the notice of the
Board. The subsequent overdues of various
loans were also not reported to the Board.
● Since the bank was growing, the statutory auditors were checking only the
incremental advances and not the entire operations in all the accounts.
● They scrutinised the accounts which were shown the bank.
● The stressed legacy accounts belonging to this group (HDIL) were replaced with
dummy accounts to match the outstanding balances in the balance sheet. As the
loans were mentioned as loans against deposits and were of lower amounts, they
were never checked by the RBI.
● 21,049 bank accounts were opened by bogus names to conceal 44 loan accounts.
● The bank's software was also tampered to conceal these loan accounts.
● This bank fraud case is busted by a bunch of women employees of the credit
department of the PMC bank.
● The RBI also put sanctions on the withdrawal of money from the bank to just Rs
1,000 per customer for the next six months, sending the small account holders into
tizzy. The limit was raised to Rs. 10,000 but angry customers have continued to
protest.
 Recent Developments

● The RBI restricted the activities of the PMC Bank for six months and asked it not to
grant or renew any loans and advances, make any investment or incur any liability,
including borrowing of funds and acceptance of fresh deposits
● After the scam was unearthed in the bank, which has deposits of over Rs 11,000 crore,
the Reserve Bank of India appointed an administrator over it, and capped its
withdrawals at Rs 40,000 per account for six months.
● Over five PMC bank account holders passed away due to reasons including heart attack,
suicide, etc.
● According to a CNN-News18 flash, RBI officials met a delegation of PMC depositors who
have been protesting at Mumbai's Azad Maidan over the central bank's strict withdrawal
limits that were imposed on the bank.
● 19 points were discussed in detail that included medical expenses, marriage expenses,
taxes etc.
● The delegation also demanded Rs 25 lakh as compensation for the kin of those
who have died due to the PMC crisis.
● The RBI told them that it will come up with a solution, and possibly convey it
through a press conference or a press release between October 25 and 27.
● PMC Depositors have given a deadline till 30th October for final decision.
● Now the Enforcement Directorate (ED) has sealed the assets of Rs 3,500 cr of the
HDIL group. HDIL chief Rakesh Wadhawan and his son Sarang Wadhawan have been
arrested by the Mumbai Police.
Media Coverage
 Bibliography

https://www.jagranjosh.com/general-knowledge/pmc-bank-fraud-case-1570456027-1

https://m.economictimes.com/industry/banking/finance/banking/the-biggest-lessons-
for-india-from-the-pmc-bank-fiasco/articleshow/71557920.cms

https://www.nationalheraldindia.com/india/explained-what-is-pmc-bank-fraud-and-
how-it-started

https://www.news18.com/news/business/pmc-bank-crisis-what-are-co-operative-
banks-and-how-are-they-different-from-commercial-ones-2346171.html

http://www.economicsdiscussion.net/india/cooperative-banking/cooperative-banking-
in-india-history-structure-importance-and-weaknesses/31365

http://www.yourarticlelibrary.com/banking/differences-between-co-operative-banks-
and-commercial-banks-in-india/26345