EOW probes how Thomas gave false reports of bad loans to RBI

Joy Thomas, the now-suspended managing director of the crisis-hit Punjab and Maharashtra Cooperative (PMC) Bank, submitted false reports of HDIL’s defaulting loan

Joy Thomas, the now-suspended managing director of the crisis-hit Punjab and Maharashtra Cooperative (PMC) Bank, submitted false reports of HDIL’s defaulting loan accounts to the Reserve Bank of India (RBI) by using around 21,000 fictitious loan default accounts twice, in 2017 and 2018, said officers from the economic offences wing (EOW) of the Mumbai police.

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Thomas was produced in the metropolitan magistrate court on Saturday, which remanded him in police custody till October 17. Public prosecutor Rajkumar Machewar argued that Thomas is the key person in the ₹4,355-crore fraud. “The [Thomas and other bank officials] granted loan first and took security much after in 2017,” Machewar argued.

The officer who is probing the case told the court, “He [Thomas] ought to have informed the RBI long before [about the defaulting loans] but failed to do that.”

An EOW officer privy to the probe said, “The excel sheets [false reports] of all the default loan accounts including that of HDIL group of companies were prepared in nearly 45 days and submitted to RBI in 2017 and 2018 to camouflage the bad loan accounts of HDIL. Thomas was in the know of all this and played a key role. He had access to the system. RBI did not check the credentials of these report, trusting the bank,” said an EOW officer privy to the probe.

EOW’s probe has revealed 44 accounts allegedly linked to HDIL that were masked by tampering with the bank’s software and remained virtually hidden from the core banking solution. Only a chosen few employees — allegedly close to Thomas — knew of these bank accounts.

Defence lawyer Rakesh Singh, while objecting to the allegations said that Thomas was never a decision-maker but is being made a scapegoat. “The loans were secured. In fact, the security against the loan is more than 2.5 times so the allegations about the loan being unsecured are false. He has nothing to gain unlawfully nor the bank has lost anything,” the defence lawyer argued.

The prosecution later countered the arguments by submitting that the security is obtained much later in 2017. “If he was innocent, what is the answer to 21,000 fictitious accounts opened to give effect to the loan and help HDIL,” the officer submitted before the court.

An EOW officer said that credentials of the 21,000 accounts are being checked as the investigators suspect that it could belong to some of the bank’s old customers who may have died.

In a five-page letter to the RBI dated September 21, a copy of which is with HT, Thomas had admitted that “as the loans outstanding were huge and if these were classified as NPAs [non-performing assets], it would have affected the profitability of the bank… this would have created reputation risk for the bank. As the HDIL group had a good record of clearing dues with certain delays, we continued to report all the accounts as standard accounts.” The letter stated how Rakesh Wadhawan and Sarang Wadhawan, who were arrested on Thursday, infused funds when PMC Bank was struggling.

The EOW and enforcement directorate has conducted searches at six places. “We are recording the statements of bank officials and will conduct probe on documents seized. The quantum of the exact amount of loans will be known after the report,” said an EOW officer.