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Almost five years before the actual fraud was unearthed, the Reserve Bank of India (RBI) had raised red flags on various aspects of Punjab and Maharashtra Cooperative Bank’s (PMC Bank) lending.
The RBI, in its inspection report for 2014-15, had noted that the PMC Bank had last reviewed its credit policy on August 30, 2014. “A serious flaw detected in the credit policy was the fact that the cash credit limits were sanctioned for three years at a stretch and were not subject to an annual review,” it had noted.
The RBI report had also said that PMC Bank’s credit appraisal and post disbursement supervision needed improvement.
Significantly, the report had observed that the bank did not maintain names of the entities related to the Directors.
Also read:PMC Bank scam: Did RBI inspection fail to catch link with HDIL in 2014-15?
“The bank had maintained a list of Directors and their relatives in the bank’s intranet website. However, it did not maintain the names of entities in which the Directors and relatives were interested in the system,” the report said.
The report was made available to activist Girish Mittal in response to an RTI application filed with him. BusinessLine has reviewed the report shared by Mittal.
Much of this seems to be in line with the confession letter of the bank’s former MD Joy Thomas and the investigations so far.
The Economic Offences Wing (EOW) of the Mumbai Police has identified Waryam Singh, former Chairman of the PMC, as the key entity in keeping the fraud under cover.
‘Audit committee ineffective’
The RBI report also highlighted that the bank’s audit policy was deficient, and the audit committee was not constituted as per guidelines of the RBI. “The functioning of the audit committee was not considered effective, as the audit observations pending for closure were not reviewed by it,” the report noted.
Also read:Watchdogs, you have failed the PMC
The report also said that the bank’s executive team needed to be more pro-active towards adhering to the Master Circulars and effective internal control through the audit machinery and the review of processes of MIS.
The report also noted that deficiencies in KYC-identification and documentation were observed during inspection.
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