The PMC scam went undetected for around 11 years despite the RBI requiring all regulated entities — including cooperative banks — to submit details of transactions and accounts to it since February 2016. The last time Reserve Bank of India was forced to issue a statement on the robustness of India’s banking system was back in October 2008 in the wake of the global financial crisis. So, on October 4, after the implosion at the Punjab and Maharashtra Co-operative Bank, when the RBI reiterated that the banking system was “safe and sound”, quite a few eyebrows were raised.
Not just because this was seen as an over-reaction, disproportionate to the rumblings at a mid-sized, Maharashtra-based cooperative bank with a deposit base of just Rs 11,000 crore, but also because the RBI itself has a few questions to answer. For, the PMC scam went undetected for around 11 years despite the RBI requiring all regulated entities — including cooperative banks — to submit details of transactions and accounts to it since February 2016.
The RBI clampdown on the bank, ironically, came 48 hours after PMC’s former Managing Director Joy Thomas apprised it of the fraud by way of a letter dated September 21. From a regulatory perspective, an even more worrying implication of the PMC implosion, experts said, is how it deepens lingering suspicion that banks and NBFCs could be hiding the full extent of their bad loans.
