Slowdown or not, these India’s banks and shadow banks are in trouble


  • PMC Bank is known to have lent to HDIL using over 20,000 bogus accounts.
  • Laxmi Vilas Bank’s directors are being investigated in a case of missing FDs.
  • DHFL’s senior citizen investors are left in the lurch as it is being investigated by police for underworld links.
  • Religare Finvest alleged that the former promoters— the SIngh brothers — have stripped the company of its assets.
Those who choose not to remember 2019 as a year of slowdown can remember it as a year of banking failures.

PMC Bank, a large commercial bank with 1.6 million depositors fell this year, almost two decades after a co-operative bank called Krushi Bank went defunct. History repeated itself with heart aches and heart attacks to depositors.

There is more to worry about as other banks might be in the throes of trouble as well. The banking regulator the Reserve Bank of India (RBI) admitted that ₹71,500 crore worth of bank frauds have been detected in 2018-19. To remedy this situation, yesterday the Central Bureau of Investigation (CBI) started conducting raids across 11 states in the country yesterday, in hopes of recovering what banks had lost.

Here are the troubles that rocked the banking sector this year.


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​PMC Bank crisis results in the death of its depositors

​PMC Bank crisis results in the death of its depositors

It has become common for Indian banks to lend to promoters who squander money. But the scam involving Punjab and Maharashtra Co-operative Bank — which is actually a scheduled commercial bank – is not just about lending to callous firms, but the way that money was lent.

Over 20,000 bogus bank accounts were opened by the bank in the firms name. Money from those accounts was passed on to the wily Wadhawans, who used it to live out on yachts with Chinese circus performances. Once the scam came to light, RBI took over and curtailed withdrawals.

But the apex institution has slowly been increasing the amounts that can be withdrawn as it takes stock of the situation. Meanwhile, at least two of its depositors died when the news of the scam came to light — one of a heart attack and the other committed suicide.

Lakshmi Vilas Bank and the case of missing FDs

Lakshmi Vilas Bank and the case of missing FDs

The troubles of this Chennai-based bank have just begun. Its problems started with Religare Finvest which is facing its own defaults and other troubles. It blamed the bank of eating away their fixed deposits.

It is not just the deposits that were under the scanner but it also spoke of a larger conspiracy to misappropriate their funds with the bank. The directors and the top management of Laxmi Vilas Bank are being investigated by the police over these allegations.

As the investigation plays out, RBI has stalled the possible merger of this bank with yet another troubled shadow bank — Indiabulls Housing.

​Ranbaxy brothers stripped Religare’s assets and lay it bare

​Ranbaxy brothers stripped Religare’s assets and lay it bare

When Malvinder Singh and Shivinder Singh — the brothers who were former owners of Ranbaxy — aren’t fighting with each other, they are scamming others. A year-long probe on round-tripping funds of the company after their exit culminated into their arrest last month.

Religare Finvest alleged the brothers of stripping the company bare have hoodwinked the RBI to strip it of a massive ₹47,958 crore. And, this is not the first time they have pulled this off. When they sold pharma company Ranbaxy to Japanese major Daiichi Sankyo, they did something similar. However, the case ended in a settlement worth over ₹2,4000 crore.

​DHFL and the case of vanishing senior citizen pensions

​DHFL and the case of vanishing senior citizen pensions

Most Deewan Housing Finance’s depositors are senior citizens. As the fraud allegations and fund misappropriation in the shadow bank has to come to light – so did tales of woe.

Many of its depositors have been banking on their savings for healthcare and other expenses. Now that money is stuck as the matter is investigated. The allegations started doing the rounds last year after IL&FS fell in June. Since, DHFL stopped making their monthly interest payments—ballooning its liquidity problems into a crisis.

Now, the shadow bank is being cornered – Reliance Nippon asset management company has filed a case against them. Also, the Enforcement Directorate is investigating into the bank’s links with Iqbal Mirchi, an aide India’s most wanted Dawood Ibrahim.

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