How a firm and few bankers used excel sheets to con a bank

MUMBAI: The Economic Offences Wing of the Mumbai Police filed an over 32,000-page chargesheet in connection with the multi-crore scam at Punjab & Maharashtra Cooperative Bank on Friday, charging HDIL promoters Rakesh and Sarang Wadhawan as well as former bank chairman Waryam Singh, managing director Joy Thomas and director SS Arora.The EOW charged the former management of PMC Bank with failing to report an account of Rakesh Wadhawan with an outstanding amount of Rs 1,671.88 crore as the top borrower from the HDIL Group and filing false statements with the Reserve Bank of India to avoid regulatory scrutiny.Of 43 accounts with an outstanding amount of Rs 5,027.33 crore in FY18, only 21 loan accounts of the HDIL Group with dues of Rs 333.14 crore were reported to the RBI, according to the chargesheet reviewed by ET. The group’s total outstanding amount accounted for more than half of PMC Bank’s entire credit exposure.The chargesheet says Rakesh and Sarang Wadhawan hatched a criminal conspiracy to cause wrongful gains for their company by taking loans from PMC Bank against mortgage facilities without providing any security.To support its findings, the EOW attached a statement of Rupali Raut, an executive of the bank’s credit department who prepared statements submitted to the RBI during FY15 to FY17.‘Rakesh Wadhawan not Named Top Borrower’Raut told the EOW that “the practice of hiding loan liability of HDIL Group company’s account dates back from almost 2008”.Rakesh Wadhawan should have been reported as the top borrower from HDIL Group in 2018, according to the EOW. However, bank officials, acting under instructions from superiors, excluded his name. The acts of concealing material facts of the total credit exposure of HDIL Group companies in PMC Bank and the preparation of false statements filed with the RBI fall well within the ambit of forgery and criminal conspiracy of the Indian Penal Code, the EOW said in the chargesheet.Similarly, irregularities were observed in other statements submitted to the RBI that dealt with segment-wise analysis and the bank’s exposure to the real estate sector.“As the main business of HDIL and its group companies is construction and development of the properties, all accounts have to be classified under commercial real estate (CRE) category… Instead, PMC Bank has shown additional counts of fictitious accounts and amounts,” the EOW said.PMC Bank showed 59,675 accounts with outstanding dues of Rs 5,528.38 crore. These accounts included 21,049 fictitious accounts purportedly prepared over the years to conceal 22 loan accounts of HDIL with outstanding dues of Rs 4,638.46 crore and 22 other loan accounts with outstanding dues of Rs 3,815.82 crore, according to the chargesheet.The probe revealed that HDIL and associate companies availed of mortgage against overdraft/ mortgage loan type credit from PMC Bank between 2008 and 2014, while Sarang and Rakesh Wadhawan availed of similar loan facilities from 2009 to 2013. While awarding these mortgage facilities, PMC Bank did not follow the rules.In the case of Sarang Wadhawan, the memorandum of deposit limit of Rs 10 crore was sanctioned in 2009 and by 2018, this limit had been renewed to Rs 91 crore. The enhanced amount was disbursed without any security. The required loan documents were invalid and the amount wasn’t repaid, which were a full-fledged breach of the RBI’s norms and conditions, the EOW said.“All facilities are mortgage loans. However, officials have not obtained security against facilities awarded... facilities have been enhanced periodically without taking into consideration the actual performance of borrowers,” it said.The bank officials, instead of classifying these loans as non-performing assets, kept charging interest on these outstanding dues to keep them alive and present them as financially sound, it was stated in the chargesheet.The alleged modus operandi involved falsifying the bank’s advances master dump Excel sheet, which required details of each loan account to be provided. The bank started to conceal select non-performing exposures by replacing the information with dummy accounts. The largest outstanding balance among the fictitious accounts mentioned in the advance master indent of FY18 was only Rs 42.83 lakh, the chargesheet stated.“The same have been missed by the previous RBI inspecting team because the balance outstanding in these fictitious accounts was considerably small in amount,” the EOW said. 73002592 According to the chargesheet, PMC Bank included 2,500 accounts in the advance master file in 2014-15 and while adding them, only the outstanding amount was mentioned. In 2015-16, a new set of accounts was included. For 2016-17, an additional 4,969 new fictitious accounts were included for a total of 17,469. For 2017-18, 3,580 fictitious accounts were added, taking the total to 21,049 fictitious accounts, according to the chargesheet.“This exercise was done for the purpose of concealing huge outstanding of HDIL Group accounts... the practice of creating fictitious accounts was applied to meet with compliance of RBI instruction regarding providing details of all borrowers of bank,” it said.The EOW said the bank maintained three notebooks containing details of the money paid and received by HDIL and its associate companies, Rakesh and Sarang Wadhawan, Waryam Singh and Joy Thomas. The money belonged to public depositors. The statements of over 40 depositors were attached with the chargesheet.“In some instances, they have paid cash to these people against cheques furnished by them and in some instances cash was paid to them without any cheque or any other instrument,” the EOW said.The chargesheet states that between 2014 and 2019, Rs 65.29 crore was paid in cash to HDIL Group which returned Rs 55.28 crore. The balance has not yet been repaid.

from Economic Times https://ift.tt/2EYaf2X