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Corporate Case Study | June 13, 2026
On the morning of September 23, 2019, the Reserve Bank of India placed restrictions on a Mumbai based cooperative bank that most Indians outside Maharashtra had never heard of, capping how much each depositor could withdraw at Rs 1,000. Within days, it became clear why. Punjab and Maharashtra Cooperative Bank, a 35 year old multi-state cooperative lender with over a hundred branches, had for years been hiding a Rs 6,500 crore exposure to a single bankrupt real estate group by routing it through 21,049 fictitious loan accounts created specifically to keep regulators from seeing the truth. Nearly 900,000 depositors found their savings frozen overnight. At least six people died in the months that followed, their deaths linked by their families to the stress of the crisis. This article traces the full arc of the PMC Bank scam, from the bank’s growth and its entanglement with HDIL, through the September 2019 collapse, the criminal investigation, and the eventual resolution through amalgamation with Unity Small Finance Bank, a process that the Bombay High Court finally affirmed as legally sound in March 2026, more than six years after the crisis began.
Table of Contents
- Part I: PMC Bank Before the Crisis A multi-state cooperative bank’s growth and its concentration risk with HDIL
- Part II: How the Fraud Worked: 21,049 Fictitious Accounts The mechanics of hiding a Rs 6,500 crore exposure from regulators for years
- Part III: September 23, 2019: The RBI Steps In The moratorium, the Rs 1,000 withdrawal cap, and the human cost
- Part IV: The Investigation: Arrests, FIRs, and the Money Laundering Case The Wadhawans, Joy Thomas, Waryam Singh, and the Enforcement Directorate’s case
- Part V: Two Years in Limbo: Extensions and Withdrawal Limit Increases How the RBI managed the crisis while searching for a resolution
- Part VI: The Resolution: Amalgamation with Unity Small Finance Bank The scheme structure, depositor repayment terms, and the new bank’s capital
- Part VII: The Conclusive Outcome as of 2026 The Bombay High Court’s ruling, what depositors actually received, and where the criminal cases stand
- Frequently Asked Questions
Rs 6,500 cr
PMC Bank’s exposure to the HDIL group as of September 19, 2019, representing approximately 73% of its total loan book of Rs 8,880 crore.
21,049
Fictitious loan accounts created to replace and conceal 44 real loan accounts belonging to HDIL and its group entities.
~9,00,000
Individual depositors affected, collectively owed approximately Rs 7,836.77 crore as of September 30, 2020.
Jan 25, 2022
Date the Government of India sanctioned the scheme amalgamating PMC Bank with Unity Small Finance Bank, finally affirmed by the Bombay High Court in March 2026.
Part IPMC Bank Before the Crisis
A Cooperative Bank That Grew Beyond Its Roots
Punjab and Maharashtra Cooperative Bank, commonly known as PMC Bank, was established in Mumbai in the mid-1980s as an urban cooperative bank under India’s cooperative banking framework. Over the following three decades, it grew well beyond the typical scale of an urban cooperative bank, eventually operating as a multi-state scheduled cooperative bank with over a hundred branches spread across several states, including Maharashtra, Delhi, Karnataka, Goa, Gujarat, Madhya Pradesh, and Andhra Pradesh. By the time of its collapse, PMC Bank was widely regarded as one of the largest cooperative banks in India by deposit size, a position that had taken decades to build and that gave its eventual failure a far wider geographic impact than a typical single-city cooperative bank failure would have had.
Cooperative banks in India occupy a regulatory middle ground. They are registered under cooperative societies legislation and historically came under the dual oversight of state Registrars of Cooperative Societies and the Reserve Bank of India, a structure that has long been criticised for creating gaps in supervision compared to commercial banks, which are regulated solely by the RBI. PMC Bank operated under this dual framework for most of its history. Its board of directors, drawn substantially from the cooperative membership and local business community in Mumbai, included individuals with overlapping interests in real estate and other businesses, a feature that would prove central to how the crisis unfolded.
The HDIL Connection
Housing Development and Infrastructure Limited, commonly known as HDIL, was at one point one of Mumbai’s largest listed real estate developers, known for slum rehabilitation projects and large land holdings across the Mumbai Metropolitan Region. HDIL’s founders, Rakesh Wadhawan and his son Sarang Wadhawan, built relationships with PMC Bank’s leadership over many years. S Waryam Singh, who became chairman of PMC Bank, had himself served on HDIL’s board until 2009, before moving to chair the bank, a dual role that the Economic Offences Wing later highlighted as a central conflict of interest in the case.
By the mid-2010s, India’s real estate sector, and HDIL in particular, was under severe financial stress. The broader credit environment for real estate developers tightened sharply after the IL&FS group’s default in 2018 triggered a liquidity crunch across India’s non-banking finance and real estate sectors, leaving HDIL increasingly unable to service its existing debts to PMC Bank, which by this point had become its single largest source of credit, far beyond what any prudent bank, let alone a cooperative bank, should have concentrated in one corporate group.
Why concentration risk matters so much for cooperative banks: Banking regulations impose limits on how much a bank can lend to a single borrower or group of connected borrowers, precisely to prevent the kind of concentration that occurred at PMC Bank. For a cooperative bank, these limits are typically even more conservative than for commercial banks, given the smaller capital base and depositor profile, which often includes a higher proportion of retail savers with limited financial sophistication relative to large commercial bank depositors. PMC Bank’s exposure to HDIL at 73% of its total loan book was not just a breach of these limits, it was a breach by an order of magnitude. A single borrower group’s financial health had effectively become the determining factor in whether the entire bank remained solvent, a structure that left the bank with essentially no margin for error once HDIL’s own finances deteriorated.
Part IIHow the Fraud Worked: 21,049 Fictitious Accounts
The Core Mechanism
The central mechanism of the PMC Bank fraud, as established by the Economic Offences Wing’s investigation, involved replacing 44 actual loan accounts belonging to HDIL and its group companies, accounts whose outstanding balances had grown to levels that would have triggered regulatory red flags if reported accurately, with 21,049 fictitious or dummy loan accounts. These dummy accounts were created in the bank’s core banking system using details of individuals and entities who, in many cases, had no knowledge that loan accounts existed in their names. By spreading the real exposure across tens of thousands of small, individually unremarkable accounts rather than a handful of enormous ones, the bank’s management was able to present a loan book that, on paper, appeared diversified and within prudential limits, while the underlying economic reality was a massive, concentrated exposure to a single distressed borrower group.
This restructuring allowed the bank to continue reporting low non-performing asset figures to the RBI and to its own auditors for years, even as HDIL’s actual ability to service its debt deteriorated sharply. The EOW’s First Information Report, registered on September 30, 2019, accused the bank’s board of directors and senior executives, including managing director Joy Thomas, of having full knowledge of this restructuring and of deliberately concealing it from the RBI’s inspection teams during the central bank’s periodic audits of the bank.
Why It Took Years to Surface
The fraud was sustained for an extended period through a combination of factors. PMC Bank’s core banking software was reportedly configured in a way that allowed certain accounts, including the dummy HDIL-linked accounts, to be flagged so that they would not appear in standard reports generated for RBI inspectors, a technical workaround that effectively created a parallel, invisible loan book. Joy Thomas later told investigators during interrogation that he had acted on instructions from the HDIL promoters and from chairman Waryam Singh in concealing the bank’s bad debts and falsifying its accounts, a claim the other accused disputed when confronted, with each party attempting to shift responsibility onto the others.
The arrangement also depended on continued lending. Investigators found that PMC Bank had continued extending fresh credit to HDIL group entities even as existing loans went unserviced, effectively using new disbursements to keep older accounts from showing overdue status, a pattern sometimes described as evergreening. This meant that each year the underlying problem grew larger even as the bank’s reported figures remained stable, a dynamic that could only be sustained as long as the bank continued to find ways to extend more credit, and that was guaranteed to collapse the moment that lending stopped, whether due to a change in management, a regulatory inspection that could not be evaded, or a liquidity shortage at the bank itself.
The role of the bank’s auditors: Among those named in the EOW’s investigation alongside the bank’s executives and the HDIL promoters were individuals connected to the bank’s statutory audit function. The presence of a 73% single-group concentration, restructured into over 21,000 individually small accounts, represents precisely the kind of anomaly that statutory audit procedures, including sampling of loan accounts and verification of borrower details, are designed to detect. The fact that this structure persisted across multiple audit cycles without being flagged externally, only coming to light after an RBI supervisory action triggered by other concerns, has been cited in academic analyses of the case as evidence of a broader failure of the three lines of defence, meaning the bank’s internal controls, its statutory auditors, and its regulatory supervisors, all of which are intended to catch exactly this kind of concealment independently of one another.
Part IIISeptember 23, 2019: The RBI Steps In
The Moratorium and the Rs 1,000 Cap
On September 23, 2019, the Reserve Bank of India imposed restrictions on PMC Bank under Section 35A of the Banking Regulation Act, 1949, the same provision used months later for the Yes Bank moratorium. The RBI superseded the bank’s board, appointed an administrator to run its operations, and, most consequentially for ordinary depositors, capped withdrawals at Rs 1,000 per account for an initial period of six months. The restrictions also barred the bank from granting or renewing any loans, making fresh investments, incurring new liabilities including borrowing funds, or accepting fresh deposits.
For depositors who had placed their life savings, retirement funds, or business working capital in PMC Bank, a Rs 1,000 limit meant an effective freeze on access to their own money. Long queues formed outside PMC Bank branches across Mumbai and other cities in the days following the announcement, as depositors attempted to withdraw whatever small amounts the restrictions permitted. Businesses that held current accounts with the bank for their working capital found themselves unable to pay suppliers, salaries, or other routine obligations.
The Human Cost
In the weeks following the RBI’s action, multiple deaths among PMC Bank depositors were reported and linked by their families and local reporting to the stress of the crisis. One widely reported case involved a depositor who died of what was confirmed to be natural causes shortly after the restrictions were imposed, a death that nonetheless became emblematic of the human toll of the crisis given the timing. Over the following months, the cumulative toll of deaths attributed by families to the stress, including heart attacks and, in some reported cases, suicides among elderly depositors who depended on their PMC Bank savings, was reported to have reached at least six and, in some subsequent accounts, as high as eleven. These deaths became a central part of the political pressure that built on the RBI and the central government to find a resolution faster than the standard cooperative bank liquidation process would normally allow.
The political response: The scale of public anger over the PMC Bank crisis, concentrated heavily in Mumbai’s middle class and elderly population, who form a disproportionate share of cooperative bank depositors in India, led to direct political intervention. The Union Finance Minister held meetings with the RBI Governor and senior central bank officials specifically to discuss depositor relief, an unusual level of direct engagement for what was, on paper, a single cooperative bank’s regulatory action. This intervention reflected the reality that while PMC Bank was one bank, the precedent it set, both for how depositors of troubled cooperative banks would be treated and for how quickly the system could respond to a crisis of this scale, had implications for public confidence in the broader cooperative banking sector, which serves tens of millions of depositors across India.
Part IVThe Investigation: Arrests, FIRs, and the Money Laundering Case
The First Information Report
On September 30, 2019, based on a complaint filed by the RBI-appointed administrator, the Economic Offences Wing of the Mumbai Police registered a First Information Report against senior officials of PMC Bank and HDIL. The FIR invoked sections of the Indian Penal Code covering criminal breach of trust by a banker (Section 409), cheating (Section 420), and forgery and falsification of records (Sections 465, 466, and 471). The FIR specifically named PMC Bank’s chairman Waryam Singh and managing director Joy Thomas, along with the Wadhawans and other bank officials, and quantified the loss caused to the bank at approximately Rs 4,355.43 crore, a figure distinct from, though related to, the broader Rs 6,500 crore total HDIL exposure.
The accordion below traces the sequence of arrests and the parallel money laundering investigation that followed.
October 3 to 4, 2019: The Wadhawans and Joy Thomas Arrested First Arrests
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On October 3, 2019, the Economic Offences Wing arrested HDIL’s executive chairman Rakesh Wadhawan and his son, vice chairman and managing director Sarang Wadhawan, after the pair were summoned for questioning and did not cooperate with investigators. The EOW simultaneously seized HDIL properties valued at approximately Rs 3,500 crore. The following day, October 4, 2019, the EOW arrested PMC Bank’s suspended managing director, Joy Thomas. On the same day, the Enforcement Directorate registered a money laundering case under the Prevention of Money Laundering Act, filing an Enforcement Case Information Report, the ED’s equivalent of a police FIR, and conducted raids at six locations in and around Mumbai. The ED stated that the proceeds of crime appeared to be larger than the loan amount under the police investigation, and that kickbacks generated through the loan arrangements may have been laundered into other assets.
October 5, 2019: Former Chairman Waryam Singh Surrenders Fourth Arrest
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On October 5, 2019, Waryam Singh, PMC Bank’s former chairman, surrendered to the Economic Offences Wing after writing to investigators expressing his intention to do so. He became the fourth person arrested in the case, following the Wadhawans and Joy Thomas. The EOW’s investigation highlighted that Singh had served on HDIL’s board until 2009 before becoming PMC Bank’s chairman, describing this as a double role that placed him on both sides of the lending relationship at the heart of the fraud. During interrogation, Joy Thomas told investigators he had acted on the instructions of the Wadhawans and Waryam Singh in concealing the bank’s bad debts, while the accused, when confronted with each other during the investigation, shifted responsibility between themselves.
Subsequent Arrests and Asset Seizures Oct to Nov 2019
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In the weeks following the initial arrests, the investigation expanded to include additional individuals, including a former director of PMC Bank, Surjit Singh Arora, and individuals connected to the bank’s statutory audit function, all accused of having unlawfully facilitated or failed to detect the fraudulent loan accounts. The Enforcement Directorate attached a private jet belonging to the Wadhawans as part of its money laundering investigation. The RBI-appointed administrator, working with the EOW, also began the process of identifying HDIL and Wadhawan family assets, including aircraft and yachts, for eventual sale under the SARFAESI Act to recover funds for the bank.
Look-out circulars were issued against seventeen individuals connected to the case, including the Wadhawans, to prevent them from leaving the country while the investigation proceeded. Investigators also examined whether funds connected to the fraud had been moved into investments held by Waryam Singh and his family members in the United States, seeking to determine whether these investments had been made through legitimate channels or involved misuse of the bank’s funds.
Rakesh and Sarang Wadhawan
Father and son, respectively chairman and managing director, and vice chairman and managing director, of HDIL. Identified as the principal beneficiaries of the concealed loans. Arrested October 3, 2019. Properties worth approximately Rs 3,500 crore attached.
S Waryam Singh
Chairman of PMC Bank at the time of the crisis, and a former HDIL board member until 2009. The EOW characterised his simultaneous roles at both entities as a central conflict of interest. Surrendered to investigators on October 5, 2019, with a demat account holding investments of approximately Rs 100 crore seized.
Joy Thomas
Managing director of PMC Bank, suspended and subsequently arrested on October 4, 2019. Told investigators he acted under instructions from the Wadhawans and Waryam Singh, while his own defence argued he had been made a scapegoat for decisions made by others.
The RBI Appointed Administrator
Took over management of PMC Bank from September 23, 2019. Filed the original complaint that led to the EOW’s FIR, oversaw the multi-year process of identifying and pursuing recovery of HDIL and Wadhawan family assets, and managed the bank through to the eventual amalgamation in January 2022.
Part VTwo Years in Limbo: Extensions and Withdrawal Limit Increases
The Slow Easing of Restrictions
Following the initial Rs 1,000 cap imposed on September 23, 2019, the RBI progressively eased withdrawal restrictions over the following weeks and months as it assessed the bank’s liquidity position and the scope of the fraud. The withdrawal limit was raised to Rs 10,000 shortly after the initial restriction, then to Rs 25,000, and by mid-October 2019 to Rs 40,000, with the RBI stating that this relaxation would allow more than 77% of depositors to withdraw their entire account balance, reflecting the reality that the vast majority of PMC Bank’s depositors held relatively small balances even though the bank’s overall deposit base was large. Over subsequent months, the limit was raised further, eventually reaching Rs 1 lakh for depositors in genuine financial distress under specific hardship provisions, though the broader restriction on normal banking operations remained in place.
Withdrawal Limit Progression (September 2019 Onward)
September 23, 2019 (Initial restriction)Rs 1,000
Late September 2019Rs 10,000
Early October 2019Rs 25,000
October 14, 2019 (covers 77% of depositors fully)Rs 40,000
Subsequent relaxations, hardship casesUp to Rs 1,00,000
Note: Bar widths are scaled relative to Rs 1,00,000 to illustrate the progression. Even at Rs 40,000, the restriction left a meaningful share of depositors with balances above that threshold unable to access their full funds for over two years until the Unity Small Finance Bank amalgamation took effect.
Why a Cooperative Bank Could Not Be Rescued Like Yes Bank
One of the most significant structural issues that emerged during this period was the RBI’s own acknowledgement, in March 2020, that unlike its powers over commercial banks, it did not have the authority to draw up an enforceable scheme of reconstruction for a cooperative bank under the law as it then stood. This stood in sharp contrast to the Yes Bank situation, where the RBI was able to design and implement a reconstruction scheme, including a fresh capital infusion led by SBI, within thirteen days of imposing a moratorium in March 2020. For PMC Bank, no equivalent mechanism existed, meaning the restrictions imposed in September 2019 had to be extended repeatedly, first by three months from March 23, 2020 to June 22, 2020, and then through further extensions, while the RBI worked with the government and potential investors on a longer-term solution within the constraints of cooperative banking law.
The legislative response: amending the Banking Regulation Act: The PMC Bank crisis, occurring within months of the Yes Bank moratorium, exposed a gap in India’s banking regulation framework specifically with respect to cooperative banks. In response, the Banking Regulation (Amendment) Act, 2020 brought cooperative banks more fully under the RBI’s regulatory ambit, including with respect to the RBI’s powers to supersede a cooperative bank’s board, appoint an administrator, and pursue schemes of reconstruction or amalgamation in a manner more comparable to its powers over commercial banks. This legislative change, while it came too late to prevent or quickly resolve the PMC Bank crisis itself, was a direct policy response to the gap that PMC Bank’s prolonged limbo period had exposed, and shaped the eventual legal pathway used for the bank’s amalgamation with Unity Small Finance Bank.
Part VIThe Resolution: Amalgamation with Unity Small Finance Bank
Finding an Acquirer
In February 2021, Centrum Financial Services, together with Resilient Innovations Private Limited, the entity behind the fintech platform BharatPe, as a joint investor, expressed interest in acquiring PMC Bank through a new small finance bank to be set up specifically for this purpose. The RBI granted this joint venture a small finance bank licence in October 2021, and the new entity, Unity Small Finance Bank Limited, commenced operations on November 1, 2021, with shareholder capital of approximately Rs 1,100 crore, well above the regulatory minimum of Rs 200 crore required to establish a small finance bank, and an asset base reported at over Rs 2,400 crore at the time of launch.
On November 22, 2021, the RBI placed a draft scheme of amalgamation in the public domain, inviting suggestions and objections from PMC Bank’s members, depositors, and other creditors, as well as from Unity Small Finance Bank, with a deadline of December 10, 2021. After this consultation period and further refinement, the Government of India sanctioned the final scheme, formally titled the Punjab and Maharashtra Co-operative Bank Limited (Amalgamation with Unity Small Finance Bank Limited) Scheme, 2022, which came into force on January 25, 2022.
How the Scheme Treated Depositors
The scheme’s depositor provisions were structured to maximise immediate relief for the largest number of people while providing a structured, multi-year repayment path for those with larger balances. Under the scheme, all eligible depositors first received payment of up to Rs 5 lakh through the Deposit Insurance and Credit Guarantee Corporation, the standard deposit insurance mechanism that covers Indian bank deposits. Because approximately 96% of PMC Bank’s depositors had balances under Rs 5 lakh, this single step meant the overwhelming majority of depositors were made whole, or close to whole, through the initial DICGC payout alone, and could choose either to withdraw these funds entirely or to keep them with Unity Small Finance Bank and earn 7% annual interest.
For depositors with balances above Rs 5 lakh, the scheme provided for additional payments in tranches over the following years: amounts ranging from Rs 50,000 up to Rs 5.5 lakh were to be paid out incrementally from the first through the fifth year after the scheme took effect, with any remaining balance to be paid at the end of ten years. Separately, the scheme specified that no interest on interest-bearing deposits would accrue for a period of five years starting from April 1, 2021, after which a simple interest rate of 2.75% per annum would apply to remaining outstanding amounts. Institutional depositors were treated differently from individual depositors: they were to receive preference shares equal to 80% of their eligible deposit balances, with the remaining 20% issued as equity share warrants that would convert into equity shares at the time of Unity Small Finance Bank’s eventual initial public offering.
DICGC Settlement Under the Amalgamation Scheme
Following the January 25, 2022 amalgamation, DICGC settled the main insured-deposit claim for traceable individual depositors of PMC Bank.
In practical terms, the DICGC settled the main claim, amounting to approximately Rs 3,791.55 crore, covering 847,506 traceable individual depositors, shortly after the scheme took effect. Unity Small Finance Bank also issued equity warrants worth Rs 1,900 crore to its promoters, exercisable within a total period of eight years, as part of the capital structure intended to support the merged entity’s ability to meet its obligations under the scheme over time. The merged entity continued to operate PMC Bank’s approximately 110 branches under the Unity Small Finance Bank name, retaining over 1,100 of PMC Bank’s employees on their existing terms and conditions of service for a period of three years from the date the scheme took effect.
Part VIIThe Conclusive Outcome as of 2026
The Bombay High Court’s March 2026 Ruling
The amalgamation scheme did not go unchallenged. A group of petitioners, including larger depositors, institutional account holders, partnership firms, and cooperative societies that held accounts with PMC Bank, filed petitions before the Bombay High Court arguing that the scheme was unfair to them specifically. Their arguments included that the draft scheme had undergone only cosmetic changes before being finalised, that reversing interest credited to accounts between April 1, 2021 and January 24, 2022 was unconstitutional, that a pro rata distribution model similar to what would apply in a formal liquidation under Section 43-A of the Banking Regulation Act should have been used instead, that delays in the overall resolution process and in DICGC payouts had specifically prejudiced larger depositors who had to wait longest for any relief, that partnership firms and societies had been incorrectly categorised under the scheme, and that alternative solutions, including a merger with a public sector bank rather than a newly formed small finance bank, had been improperly rejected without adequate justification.
In March 2026, the Bombay High Court ruled on these petitions and affirmed the amalgamation scheme. In doing so, the court considered the financial position of PMC Bank at the time the scheme was designed: as of September 30, 2021, the bank’s net worth was negative at approximately Rs 6,737.61 crore, deposit erosion had reached 62.99%, and 83% of its loan portfolio was non-performing. The court held that the classification of different categories of depositors and investors under the scheme had been designed to serve the public interest by protecting the largest possible number of depositors, and that given the severity of the bank’s financial position, the scheme represented a legally sound and proportionate resolution rather than an arbitrary or unconstitutional one. This ruling represented the final major legal hurdle to the amalgamation’s validity being fully settled, more than six years after the crisis began.
What the numbers in the court’s ruling actually mean: A negative net worth of Rs 6,737.61 crore as of September 2021 means that PMC Bank’s liabilities, primarily what it owed its depositors, exceeded its assets by that amount. Combined with deposit erosion of 62.99%, meaning roughly two thirds of the value depositors had placed with the bank had effectively been lost to bad loans and provisioning, and 83% of the loan portfolio being non-performing, these figures collectively establish that PMC Bank by late 2021 was not a viable standalone institution under any realistic scenario. The court’s acceptance of these figures as the backdrop for its ruling is significant because it means the legal question was never really whether depositors would receive everything they were owed immediately, since the bank simply did not have the assets to make that possible, but rather whether the specific structure chosen, DICGC-backed immediate relief for the vast majority combined with a multi-year phased recovery for the rest, was a fair and lawful way to allocate an institution’s insufficient assets among its many claimants.
Where the Criminal Cases Stand
The criminal investigation into the PMC Bank fraud has proceeded on two parallel tracks since 2019: the Economic Offences Wing’s case under the Indian Penal Code, focused on the original fraud, forgery, and breach of trust allegations, and the Enforcement Directorate’s case under the Prevention of Money Laundering Act, focused on tracing and attaching the proceeds of the alleged fraud. Both agencies have filed extensive chargesheets running into tens of thousands of pages collectively, reflecting the scale of the 21,049 fictitious accounts that had to be individually examined as part of establishing the pattern of the fraud. Asset attachment and recovery efforts against the Wadhawans and HDIL group entities, including aircraft, yachts, and real estate, have continued through the RBI administrator and the investigating agencies, with proceeds intended to flow toward recoveries for the bank and its depositors over time.
As of mid-2026, the underlying criminal trial proceedings remain ongoing in the Indian court system, a timeline that is not unusual for financial fraud cases of this scale and complexity in India, where complex economic offence trials involving voluminous documentary evidence and multiple accused frequently extend over many years. The resolution of the banking and depositor side of the crisis, through the Unity Small Finance Bank amalgamation and its subsequent affirmation by the Bombay High Court, has therefore proceeded on a substantially faster timeline than the resolution of the criminal liability of the individuals accused of causing the crisis in the first place, a pattern that reflects the different objectives and procedural requirements of bank resolution law versus criminal law in India.
What the PMC Bank Case Ultimately Settled, and What It Left Open
The PMC Bank scam, at its core, was a story of a single, massive, hidden concentration risk, an exposure to one real estate group equal to nearly three quarters of the bank’s entire loan book, sustained for years through the creation of over twenty one thousand fictitious accounts and the cooperation, willing or coerced, of the bank’s own chairman and managing director with the borrowers themselves. The conflict of interest at the centre of the case, a chairman who had previously sat on the board of the very company his bank was secretly bankrolling, is about as direct an illustration of governance failure as Indian banking has produced.
The conclusive outcome, six and a half years after the RBI first capped withdrawals at Rs 1,000, is a resolution that protected the vast majority of depositors relatively quickly through DICGC’s Rs 5 lakh insurance cover, reaching 96% of account holders, while leaving a smaller group of larger depositors and institutional account holders to recover the remainder of their funds over a structured period extending up to ten years, a structure that the Bombay High Court has now affirmed as lawful given the bank’s negative net worth of over Rs 6,700 crore at the time the scheme was designed. PMC Bank itself no longer exists as an independent entity, its branches and employees absorbed into Unity Small Finance Bank, a newly licensed institution built specifically to carry out this resolution.
What remains open, even after the Bombay High Court’s 2026 ruling, is the final disposition of the criminal cases against the individuals at the centre of the fraud, the Wadhawans, Joy Thomas, and Waryam Singh, whose trials continue in parallel with, but on a slower timeline than, the resolution of the bank itself. For India’s cooperative banking sector more broadly, the case’s most durable legacy may be the Banking Regulation (Amendment) Act, 2020, which brought cooperative banks more fully under the RBI’s direct regulatory powers, a structural change made in direct response to the gap PMC Bank’s prolonged limbo period exposed: a crisis the RBI could see clearly but, for over two years, lacked the explicit legal tools to resolve as decisively as it ultimately resolved Yes Bank’s commercial banking crisis within the same year.
Frequently Asked Questions
PMC Bank, a Mumbai based multi-state cooperative bank, had lent approximately Rs 6,500 crore, about 73% of its entire loan book, to a single real estate group, HDIL, far beyond what banking regulations permit for exposure to one borrower group. To hide this from RBI inspectors and auditors, the bank’s management replaced 44 actual HDIL-linked loan accounts with 21,049 fictitious loan accounts, spreading the real exposure across thousands of small, individually unremarkable entries in the bank’s systems so that the loan book appeared diversified and within limits on paper.
This concealment was sustained for years, helped by the fact that PMC Bank’s chairman, S Waryam Singh, had previously served on HDIL’s own board, creating a direct conflict of interest. The scheme finally collapsed when the RBI imposed restrictions on the bank on September 23, 2019, capping withdrawals at Rs 1,000 per depositor and triggering arrests of HDIL’s promoters Rakesh and Sarang Wadhawan, PMC Bank’s managing director Joy Thomas, and chairman Waryam Singh.
The resolution came through an amalgamation scheme that took effect on January 25, 2022, merging PMC Bank into a newly licensed entity, Unity Small Finance Bank, formed by Centrum Financial Services and BharatPe’s parent Resilient Innovations. Under the scheme, all eligible depositors first received up to Rs 5 lakh through the Deposit Insurance and Credit Guarantee Corporation. Since approximately 96% of PMC Bank’s depositors had balances under Rs 5 lakh, this single step made the overwhelming majority of depositors whole, with the DICGC settling the main claim of approximately Rs 3,791.55 crore for 847,506 traceable depositors shortly after.
For the remaining 4% of depositors with larger balances, the scheme provided for phased additional payments, ranging from Rs 50,000 to Rs 5.5 lakh, paid out incrementally over the first five years, with any remaining balance to be paid after ten years. Institutional depositors received 80% of their balances as preference shares and the remaining 20% as equity warrants that would convert to shares when Unity Small Finance Bank eventually has an initial public offering. Interest on deposits did not accrue for five years from April 1, 2021, after which a simple 2.75% annual interest rate applies to remaining balances.
The fundamental reason was a legal gap rather than a policy choice. When the RBI faced the Yes Bank crisis in March 2020, it had clear statutory authority under the Banking Regulation Act to design and implement an enforceable reconstruction scheme for a commercial bank, which it used to bring in SBI and seven other banks within thirteen days. For cooperative banks like PMC Bank, the RBI explicitly stated in March 2020 that it lacked an equivalent power to draw up an enforceable reconstruction scheme under the law as it then stood.
As a result, PMC Bank’s restrictions, first imposed in September 2019, had to be extended repeatedly in three-month increments while the RBI, the government, and potential investors worked toward a solution within the existing legal framework. The eventual fix required finding a private investor group, Centrum and BharatPe’s Resilient Innovations, willing to set up an entirely new small finance bank, obtaining a banking licence for that new entity, designing a detailed amalgamation scheme, putting it through a public consultation process, and securing government sanction, a process that took until January 2022 to complete. The Banking Regulation (Amendment) Act, 2020, passed in the interim, was a direct legislative response intended to give the RBI stronger powers over cooperative banks going forward.
Four individuals were arrested in the initial wave in October 2019: HDIL’s Rakesh Wadhawan and Sarang Wadhawan on October 3, PMC Bank’s managing director Joy Thomas on October 4, and PMC Bank’s chairman S Waryam Singh, who surrendered on October 5. Additional individuals, including a former PMC Bank director and individuals connected to the bank’s audit function, were implicated as the investigation expanded. The Enforcement Directorate registered a parallel money laundering case and attached assets including a private jet belonging to the Wadhawans, with the RBI administrator separately pursuing recovery of HDIL and Wadhawan family assets, including aircraft and yachts, under the SARFAESI Act.
As of mid-2026, the criminal trial proceedings under both the Indian Penal Code charges filed by the Economic Offences Wing and the money laundering case filed by the Enforcement Directorate remain ongoing, with chargesheets running into tens of thousands of pages given the scale of the 21,049 fictitious accounts that had to be documented. While the banking and depositor resolution side of the case has been substantially concluded, most recently with the Bombay High Court’s March 2026 affirmation of the amalgamation scheme, the criminal cases against the individuals involved have proceeded on a separate, longer timeline that had not reached a final verdict as of the time of this article.
The most significant regulatory change was the Banking Regulation (Amendment) Act, 2020, which extended the RBI’s regulatory powers over cooperative banks to bring them closer in line with its powers over commercial banks, including with respect to superseding boards, appointing administrators, and pursuing schemes of reconstruction or amalgamation. This addressed the specific gap that PMC Bank’s case exposed, namely that the RBI in 2020 explicitly stated it lacked an enforceable mechanism to restructure a cooperative bank in the way it could a commercial bank.
Beyond the legislative change, the case has been studied extensively as an example of failures across multiple layers of oversight simultaneously, the bank’s internal controls, its statutory audit, and its regulatory supervision under the prior dual oversight structure between state cooperative registrars and the RBI. The case is frequently cited in discussions of corporate governance in Indian cooperative banking, particularly regarding the risks created when individuals hold overlapping roles across a lender and a major borrower, as was the case with PMC Bank’s chairman having previously served on the board of HDIL, the group that became the bank’s largest and most concealed exposure.
Disclaimer: This article is for informational and educational purposes only and is current as of June 10, 2026. Facts and figures are sourced from RBI press releases and directives issued under Section 35A of the Banking Regulation Act, 1949, the Economic Offences Wing’s First Information Report dated September 30, 2019, the Punjab and Maharashtra Co-operative Bank Limited (Amalgamation with Unity Small Finance Bank Limited) Scheme, 2022 as gazetted by the Government of India, Deposit Insurance and Credit Guarantee Corporation public statements regarding claim settlements, and Bombay High Court proceedings on the amalgamation scheme. This article does not constitute legal or investment advice.
