PMC Bank Adminstrator JB Bhoria’s previous stint at Namco Bank Saw a 40% Jump in NPA
When Punjab and Maharashtra Cooperative Bank (PMC Bank) scam hit the headlines, the Reserve Bank of India (RBI) appointed JB Bhoria, as the administrator of the scam-hit bank on 23 September 2019. He was the regional director of RBI for Maharashtra and Goa till 2013. 
 
What can one expect from Mr Bhoria, in terms of helping re-start the scam-hit PMC bank? It turns out that this is not the first time that he has been appointed as administrator. His previous stint as administrator was not good, even when he headed a bank that had no financial problem.
 
In 2014, the RBI, in its wisdom, decided to place the Nashik Merchant’s Cooperative (Namco) Bank under an administrator. At that time it was emphasised that Namco Bank was not facing any financial problem. The action related to other issues. 
 
The Bank’s performance declined during Mr Boria’s tenure. According to current chairman Sohanlal Bhandari, the gross non-performing assets (NPAs) of Namco Bank allegedly increased by a whopping 40% to Rs318.67 crore during the administrator’s tenure. 
 
Mr Bhandari told Moneylife in a telephonic interview, "the less said the better about the tenure of the administrator at our bank. After appointment of the administrator, we expected effective and prudent management at the bank. However, in his (Mr Bhoria's) tenure, the financial position of Namco Bank became weak. When Mr Bhoria was appointed as administrator, our bank had a gross NPA of 4.10% and zero net NPA. However, as on 31 December 2018, our gross NPAs increased by 38.38% to Rs318.67 crore while net NPA increased to over 20%."
 
"During Mr Bhoria's tenure, several unqualified borrowers obtained loans on inflated valuation and at higher loan-to-value ratio. A property valued at Rs1 crore was shown as valued at Rs1.25 crore for the loan purpose. In addition, the bank sanctioned a loan of 70% of this inflated value against the 50% norm that was practiced before appointment of the administrator. Mr Bhoria also pressured bank officials to sanction these inflated loans," Mr Bhandari alleged.  
 
According to Mr Bhandari, the new board of directors and bank staff took several measures to reduce the NPAs. Namco Bank has now reduced its gross NPA to 28.94% to Rs248.89 crore as on 31 March 2019, he added. 
 
Mr Bhoria, however, says, statistics do not always show clear picture, especially in banking. “During my tenure at Namco Bank, I took efforts in increase reserve funds by about Rs200 crore. You can see there is a rise in the bank’s capital to risk (weighted) assets ratio (CRAR) and reserve fund that indicate increase in strength and growth of the bank. Also on sanctioning loans, we have followed all the norms and the decisions to sanction loans were taken by the loan committee after proper scrutiny.”
 
The RBI had appointed Mr Bhoria as administrator in January 2014, after finding some lapses in management practices at Namco Bank. According to a reply received by Girish Mittal, under Right to Information (RTI) Act, Mr Bhoria was appointed as administrator for one year at a fixed monthly remuneration of Rs1 lakh plus Rs25,000 as allowances to be paid by Namco Bank. 
 
However, Mr Bhoria remained as administrator for about five years. He says, “The decision (to continue to have administrator) was taken by RBI. When they (RBI) asked me to step in, I joined Namco Bank. When they asked me to step down, I handed over the reins to the new board of directors.”
 
According to Mr Bhandari, who was chairman of Namco Bank before the appointment of an administrator and is current chairman as well, appointment of an administrator by RBI was only on technical ground and had nothing to do with the functioning of Namco Bank, which was in a sound financial health. 
 
He says, "Namco Bank used to donate some money to a charitable trust on regular basis. Some of our directors were also trustee of a charitable trust that had received Rs23 lakh as donation from Namco Bank. When it was pointed out to us by RBI during the audit, we took necessary steps, including reversing the transaction. However, RBI went ahead with its action and appointed Mr Bhoria as administrator."
 
On 17 July 2013, the RBI imposed a penalty of Rs5 lakh on Namco Bank for violation of its instructions and guidelines. In a release at that time, the central bank had said, “Inspection of the bank with reference to its position as on 31 March 2012 revealed that the bank had persistently violated section 6(1) (j) of the banking Regulation Act 1949 (AACS) as it had set up a trust in the name and style of NAMCO Charitable Trust and the trust had seven Trustees, who were also Directors of the bank and the purpose of the trust was to run a medical college cum hospital for general public. Thus there was evidence of recurrence of violation of section 6(1) (j) of the Banking Regulation Act 1949 (AACS). After considering the facts of the case and bank’s reply in the matter, the Reserve Bank of India came to the conclusion that the violations were substantiated and classified as ‘Major’ which warranted imposition of penalty.”
 
In January 2019, the Pragati panel led by Mr Bhandari won all 21 seats during the election at Namco Bank. Mr Bhandari returned as chairman of the bank after a gap of four years.  
 
(Pragati panel members after the election in January 2019)
 
Established in June 1959, Namco Bank has over 81 branches in three states, Maharashtra, Gujarat and Telangana. 
 
As on 31 March 2019, Namco Bank had total deposit of over Rs1410 crore while loan and advances were about Rs860 crore. The Bank reported a rise in loss of 26.78% to Rs32.80 crore from Rs44.81 crore reported during previous year. 
 
Given Mr Boria’s record with a financial healthy bank, what can on expect from him in the extraordinarily challenging situation at PMC Bank? 
 
PMC Bank, with 137 branches and deposits of over Rs11,000 crore (at end of March 2019) is the victim of a massive scam, where the former managing director Joy Thomas allowed over Rs6,500 crore to be lent to the HDIL group by creating 21,049 fake accounts. 
 
HDIL accounted for nearly 73% of the bank's total loans when it was put under administration and there was a clear element of conflict of interest, given that two-time chairman Waryam Singh was a part of the promoter group at HDIL.
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    COMMENTS

    valentine barboza

    2 weeks ago

    Why appoint an ineffective man as an administrator. His past stint reveals the truth.. he should not be appointed .. whatever is left of pmc bank will be gone with a wrong administrator

    Satish Marathe

    3 weeks ago

    How come Election of NAMCO was not held for 4 long years ?
    Is it not true, that post passage of 97th Constitution Amendment, Bank can be under an Administrstor max for a period of 1 year ?

    Abhiraj Jalota

    3 weeks ago

    excellent study

    Sandeep More

    3 weeks ago

    The penultimate question is Should professionalism or should the caste factor play an important role ?

    manojkamrarti

    3 weeks ago

    section 6(1)(j) of BR Act-1949--
    6. Forms of business in which banking companies may engage
    (1) In addition to the business of banking, a banking company may engage in any
    one or more of the following forms of business, namely:-
    (j) establishing and supporting or aiding in the establishment and support of
    associations, institutions, funds, trusts and conveniences calculated to benefit
    employees or ex-employees of the company or the dependents or connections
    of such persons; granting pensions and allowances and making payments
    towards insurance; subscribing to or guaranteeing moneys for charitable or
    benevolent objects or for any exhibition or for any public, general or useful
    object;
    So there seem to be no violation.

    SEBI Asks Banks to Disclose NPA Divergence and Provisioning Within 24 Hours
    Market regulator SEBI has asked all listed banks to disclose divergences and provisioning beyond specified threshold, as soon as reasonably possible and not later than 24 hours upon receipt of the Reserve Bank of India (RBI)’s final risk assessment report (RAR), instead of waiting to publish them as part of annual financial statements.
     
    SEBI says, banks will have make disclosures in either or both the cases where additional provisioning for non-performing assets (NPAs) assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period, and the additional gross NPAs identified by RBI exceed 15% of the published incremental gross NPAs for the reference period.
     
    At present, banks disclose NPA divergences and provisioning in their quarterly reports. 
     
    Earlier in April this year, RBI had mandated banks to disclose certain cases of divergence in asset classification and provisioning in their notes to accounts in the ensuing annual financial 
    statements published immediately following communication of such divergence by the central bank to the lender.
     
    "These disclosures in respect of divergence and provisioning are in the nature of material events or information and hence, necessitate immediate disclosure. Further, this information is also price sensitive, requiring prompt disclosure," SEBI says in the circular. 
     
    Here is the format in which banks are required to submit NPA divergence and provisioning...
     
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    COMMENTS

    Dr.Dhananjaya Bhupathi

    3 weeks ago

    https://www.moneylife.in/article/sebi-asks-banks-to-disclose-npa-divergence-and-provisioning-within-24-hours/58560.html1. Kudos to Shri Shakthikanth Das, RBI Governor for the initiative he has taken.
    2. Next is fraud-generating IBA & UFBU. Entire IBA + UFBU members possess assets disproportionate to known sources of income. PSB/SBI boards, CMDs, CEOs, EDs are harbingers for the creation of big size NPAs. If Modi 2.00 does not want to open Pandora’s box by inquiry, action----entire Banking structure may be in the doldrums. Instead, GOI may formulate guidelines to encourage corruption-free Bank Promotions, Boards and appointment of CMDs, etc.
    3. Lest Karma Yogi, PM’s efforts to mobilize the US $.5 trillion shall go under the drain & his dream becomes a pipe-dream.
    4. https://www.youtube.com/watch?v=4Si8U02s8cQ.
    5. SATYAMAEVA JAYATHE!!!

    Dr.Dhananjaya Bhupathi

    3 weeks ago

    Why beat around the bush? ORGANIZED CRIME BY IBA,DUDS OF ADHOCISM IN PMO/UFM:
    IBA [1945], a voluntary organization is neither registered nor its accounts are audited. IBA about Rs.200 crores annually from 253 members, PSB, Private & co-op banks, etc., towards membership fees & bribes the powers that be through 3Ws-WINE, WOMAN & WEALTH. IBA IS OMNIPOTENT TO SEEK PAID stay orders, appeals + JUDGMENTS against HC/SC judgments also.
    Shri Shaltikanth Das, RBI Governor penalizes erring PSBs for violation/non-compliance of policy guidelines. But, none in PMO/UFM ever bothers to penalize for IBA for its callousness & misdeeds; BY OVERT SILENCE. SINCE NONE CAN DESIST THE INFLUENCE OF 3Ws!!!

    Ramesh Poapt

    3 weeks ago

    there are many other 'divergences' always overlooked by SEBI!

    RBI Reorganises Regulation and Supervision Departments
    The Reserve Bank of India (RBI) on Friday reorganised its regulatory and supervisory departments to make these processes more activity based instead of being segmented in the structure. With this, the central bank has unified six banking, non-banking and cooperative banking departments that were individually conducting supervisory and regulatory functions in to two departments.  
     
    In a release, RBI says, "With a view to having a holistic approach to supervision and regulation of the regulated entities so as to address growing complexities, size and inter-connectedness as also to deal more effectively with potential systemic risk that could arise due to possible supervisory arbitrage and information asymmetry, it has been decided to integrate the supervision function into a unified department of supervision and regulatory functions into a unified department of regulation from 1 November 2019."
     
    At present, supervision of financial sector entities is undertaken through three separate departments like department of banking supervision, department of non-banking supervision and department of co-operative bank supervision. Similarly, regulatory functions relating to financial sector entities are carried out through three separate departments, such as department of banking regulation, department of non-banking regulation and department of cooperative banking regulation.
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    manojkamrarti

    2 weeks ago

    These departments looks impressive in papers but actually no clearcut liabilities have been defined for their carelessness resulting in everyday big scams. Bikaner urban cooperative bank never submitted any return for two decades and despite that dcbs never penalised such defaulter. So rather than unification, clear responsiblities of the staff need to b spelt out in case of omission to penalise defaulter banks.

    All deptt seem to be working in unison in carelessness. Annual reports published by economic and statistics deptt never discloses non-reporting banks or data based on how many reporting banks.

    So such unification will have hardly any effect over decades long inertia.

    Dr.Dhananjaya Bhupathi

    3 weeks ago

    HOW ABOUT REORGANIZING PMO & UNION FINANCE MINISTRY BY SHEDDING THE INHERITED DUDS OF ADHOCISM & GIVING SCOPE TO PLACE VISIONARIES ON PAR WITH PM"S VISION?

    We are listening!

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