PMC Bank Update: Will Depositors’ Woes Worsen?
Moneylife Digital Team 08 November 2019
Inter-Creditor Agreements: Will Problems Worsen?
On 7th November 2019, the Business Standard reported that PMC Bank’s woes might worsen as urban co-operative banks have not been made part of inter-creditor agreements (ICA). This might lead to questions as to where PMC Bank stands in the pecking order for recovery of its dues from HDIL, worth Rs 6,500 crore, Housing Development Infrastructure (HDIL).
Under the Reserve Bank of India’s (RBI) June 7 guidelines on resolution of stressed assets, all bank groups except urban cooperative banks (UCBs) have to mandatorily sign the ICA. The signatories include scheduled commercial banks (not regional rural banks or RRBs),National Bank for Agriculture and Rural Development, National Housing Bank, Exim Bank, SIDBI, small finance banks, as well as systemically important deposit taking and non-deposit taking non-banking financial companies.
Effectively PMC Bank is now sharing space with a select group comprising high-street mutual funds, private equity firms, alternate investments funds, and off-shore lenders that have no seat at the ICA table.
ED: HDIL Diverted Rs160 crore of PMC Bank loans
On 6th November 2019, Firspost reported that the Enforcement Directorate's (ED) investigation found that the promoters of Housing Development Infrastructure (HDIL), Rakesh Wadhawan and Sarang Wadhawan, has allegedly diverted a Rs 160 crore, PMC Bank loan to three Delhi-based hotels (called Libra Hotels) in which Rakesh Kumar Wadhawan is a director and shareholder.
An ED official identified these as 3-star hotels named Hotel Conclave Executive, Hotel Conclave and Hotel Conclave Comfort. TheWadhawans are accused of having siphoned funds from PMC Bank using overdraft facilities “disguised” as loan accounts, in collusion with bank officials.
RBI Monitoring Situation
Governor Shaktikanta Das told the media that RBI is closely monitoring the situation at the scam-hit bank. He added that an appointed agency was assessing the market value of the bank's assets (which are spread over various parts of Maharashtra and other states) and they would also check if the assets were encumbered to any other entity. Based on that, the Reserve Bank will take further decisions with regard to PMC Bank.
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