PMC’s Bad Credits Pose a Major Challenge for New Promoters

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IN Centrum Group promoted by Jaspal Bindra, who has received the go-ahead to acquire the Punjab and Maharashtra Cooperative Bank (PMC), will face the daunting task of getting the funds back to pay off debt to the bank’s depositors.

The bank is pursuing several lawsuits against 25 companies associated with Housing Development and Infrastructure Ltd (HDIL) in various legal forums, including the National Company Court (NCLT) and the Cooperative Arbitration Court, in order to recover the money that the former management of PMC Bank borrowed HDIL as a loan. fraudulently. The outstanding contributions of these companies were Rs 6,212 crore as of March 2020, representing 73.3% of the loan portfolio 8,477 crores PMC.

However, the available security is rated only in Rs 1,400 crore, which is mostly land, said a person knowledgeable about the matter.

“The trial is complicated. Nine months passed, and some cases were never accepted. The Reserve Bank of India (RBI) appointed administrator and advisers cannot enter into any private transactions to repay these loans. These loans also cannot be sold to asset recovery companies as they are classified as fraudulent accounts. The bank has fully provided for it, so the new founders do not need to set aside new capital for this, ”said the person mentioned above.

The bank also announced tenders for two jets and a French-made yacht to pay back the loans. These assets belong to HDIL owners Rakesh Wadhavan and his son Sarang Wadhavan, the main accused of the cooperative bank scam.

In September 2019, RBI severely restricted PMC Bank’s activities, including cash withdrawals, amid an investigation into accounting errors. Cash withdrawals were initially limited 1,000 per account over six months, but gradually decreases to 100,000 last June.

Nearly two years after restrictions were imposed on the bank, RBI allowed Centrum Financial Services and the BharatPe payment platform to take control of PMC Bank. Centrum Financial Services is a listed subsidiary of Centrum Capital that provides loans to small and medium-sized companies ranging from 2 lakhs in 2 crores. Resilient Innovations Pvt. Ltd, which operates BharatPe, will be an equal partner in a small financial bank. The organizers of the new bank pledged to attract Rs 1,800 crore in stages. A small financial bank will have an initial capital base of Rs 500.

Any reimbursement from HDIL will be subject to NCLT proceedings. A troubled real estate firm that should Rs 6,840 crore to creditors is in the process of bankruptcy. According to Financial Express HDIL received six expressions of interest from plaintiffs last year, including Adani Properties Private Ltd (APPL), Suraksha Asset Reconstruction and Sunteck Realty. None of the three potential applicants submitted a resolution plan with a deadline expiring on January 7th. Instead, APPL filed an interim application demanding partial resolution of the company’s problem.

“Since the banks have written off this account, whatever they restore will add to income for the year in which they were sold. Asset recovery will depend on the HDIL resolution plan in accordance with the Insolvency and Insolvency Code, ”said Girish Rawat, partner at Luthra & Luthra.

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