PMC Bank crisis: HDIL says loans taken after giving adequate security cover

Crisis-hit Housing Development and Infrastructure Ltd (HDIL) on Tuesday (October 1) said that loans taken from banks including Punjab and Maharashtra Cooperative (PMC) Bank were doing steady business after providing adequate security cover.

HDIL also said that it was ready to hold discussions with the PMC Bank to protect the interest of depositors.

The Mumbai Police on Monday (September 30) filed a case against the former bank management and promoters of HDIL in the PMC Bank case and said that a special investigation team will be probing the case.

Replying to clarification sought by stock exchanges, debt-laden HDIL said that its books of accounts are audited and reflect a true and fair picture of the company’s business. “The company has over a period of time availed of banking facilities from various banks and institutions including PMC Bank in the normal course of business,” HDIL Vice Chairman and MD Sarang Wadhawan said in a regulatory filing.

He further said that “adequate security cover in favour of the banks including PMC Bank has been created” over the assets of the company for these facilities in due compliance with all banking regulations as per guidelines described by the RBI.

Also read: PMC bank withdrawal limit could be raised to ₹1 lakh, says expelled MD

Wadhawan said that the company is facing temporary cash flow issues due to slowdown in the real estate sector. As a result, he said, the company has been admitted under the Insolvency and Bankruptcy Code (IBC), 2016 but added that it was “actively attempting to resolve” the issue.

The liquidity issue of the bank came to the light when BJP leader Kirit Somaiya demanded action against the PMC bank board members as well as the HDIL.

The PMCB had provided loans worth ₹2,500 crore to HDIL. HDIL had been unable to service the debt for approximately 2-3 years, LiveMint quoted PMC Bank’s suspended managing director Joy Thomas as saying.

PMC Bank and HDIL had maintained a steady banking relationship ever since the 90s, but the amount borrowed and lent had increased over the past years and went unreported to the RBI.

Thomas reportedly admitted to the RBI that the bank’s actual exposure to the bankrupt HDIL is over ₹6,500 crore – four times the regulatory cap or a whopping 73 per cent of its entire assets of ₹8,880 crore.

Also read: RBI hikes withdrawal limit from ₹1,000 to ₹10,000 for PMC bank customers

He had supposedly confessed after a board member leaked the actual balance sheet details to the RBI.

Thomas claimed that the increase in loan amounts couldn’t be exposed earlier as they wanted the bank to grow fast, and feared that they would lose their customers once depositors got wind of their debt history.

“In relation to borrowings from PMC, we have already issued letters requesting an appointment with the administrator in charge of the bank to put forth the true and correct picture as also to discuss a strategy hereby the interest of all stakeholders and in particular PMC Bank and its Depositors is protected,” Wadhawan said.

He said that HDIL would take all necessary steps and extend full cooperation with any and all agencies/authorities during this period. “We would endeavour to put in place plans to address interest and aspirations of all the stakeholders and extend full cooperation with the regulators and authorities during this time,” Wadhawan said.

He also said that the company was not aware of any action against HDIL and its promoters. “HDIL has been made aware of certain regulatory action against PMC Bank and its management. It is also learnt that certain action is being initiated against HDIL and its Promoters. We are unaware of any action against HDIL and its Promoter,” Wadhawan said.