- The two promoters allegedly created 21,000 fake accounts
- The real estate firm continued to default on loans
- PMC Bank allegedly did not mention the matter in its annual report
The father-son promoters of crisis-hit real estate firm Housing Development and Infrastructure Ltd (HDIL) openly maintained a flamboyant lifestyle as they moved around with armed guards. Accused of not repaying loans up to Rs 6,500 crore to Punjab and Maharashtra Cooperative (PMC) Bank, Rakesh Kumar Wadhawan and his son Sarang Wadhawan will stay in a police lockup till October 9. The two were often seen in parties hosted by Mumbai's who's who, sources said.
The situation has suddenly gone south for the businessmen who are known to be close to film stars and politicians, sources said, after angry customers of PMC Bank demanded the government's intervention to save their deposit.
PMC Bank gave Rs 4,000 crore or 75 per cent of its entire loan book to the now bankrupt HDIL. The two promoters allegedly created 21,000 fake accounts to camouflage the loans from PMC. The real estate firm continued to default on loans while PMC Bank allegedly did not mention the matter in its annual report. The cooperative bank kept giving loans despite the company being taken for insolvency, investigators said last week.
Amit Desai, the lawyer who is representing the Wadhawans, said their arrest has "destroyed the liquidation process". "That (liquidation) could have helped the bank's depositors get back their money," said Mr Desai. "We are trying to pay off all the loans."
The lawyer said the Wadhawans have disclosed all loans in their balance sheet, and it is the PMC Bank that should get the stick in the alleged scam.
Others named in the police case include former PMC Bank chairman Waryam Singh and its former managing director Joy Thomas. The HDIL promoters and the senior bank officials allegedly colluded to cheat the bank.
PMC Bank officials allegedly misled the Reserve Bank of India (RBI) for over a decade from 2008 to August 2019. The fictitious loan accounts were not entered into the bank's core banking system - a factor key in the Rs 14,000-crore fraud at Punjab National Bank that was uncovered in 2018.
The RBI has increased the withdrawal limit for PMC Bank customers twice, from Rs 1,000 to Rs 10,000, to eventually settle at Rs 25,000 per customer. The latest amount, the RBI said, covers 70 per cent of the depositors who can withdraw their entire balance in one go.
The Enforcement Directorate has stepped in to see if money laundering was involved and raided six places this morning. RBI Governor Shaktikanta Das on Friday said the central bank won't allow any cooperative bank to collapse.
Depositors at cooperative banks are in a relatively higher risk zone as the supervision and administration of these entities falls under state governments and the central bank. The central bank cannot take any action against the banks unilaterally but can suggest a plan to the state government which has the ultimate authority to decide if the bank should continue operations or be shut down.
Currently, HDIL is developing projects at Kurla, Nahur, Mulund and Palghar, and has a residential portfolio of 86.22 lakh sqft under construction. It has a land reserve of 193 million sqft as on March 31, with 90 per cent of its land reserves in Mumbai Metropolitan Region, as per its 2018-19 annual report.
Incorporated in 1996, Mumbai-based HDIL mainly focused on real estate development in the Mumbai Metropolitan Region, which included clearing slum land and rehabilitating the residents.