An organisation representing depositors of the New India Co-Operative Bank has filed a petition with the Reserve Bank of India (RBI), seeking urgent measures to alleviate their financial hardship. This development follows allegations of embezzlement amounting to ₹122 crore, leading to severe restrictions on withdrawals and the subsequent supersession of the bank’s board.
The petition highlights concerns over potential “deeper financial irregularities like undisclosed non-performing assets (NPAs) or additional frauds”, which may have exacerbated the crisis.
The Economic Offences Wing (EOW) of the Mumbai police has been actively investigating the scam, leading to the arrest of Hitesh Mehta, the former General Manager and Head of Accounts at the bank. Mehta is accused of misappropriating ₹122 crore from the bank’s safes at its Prabhadevi and Goregaon branches in Mumbai.
In response to these developments, the RBI imposed severe restrictions on the bank, including limits on withdrawals to safeguard depositors’ interests. Soon after, the bank’s board was superseded, and an administrator was appointed to oversee its operations.
In a formal memorandum submitted to RBI Governor Sanjay Malhotra, the New India Co-Operative Bank Depositors’ Foundation has called for immediate remedial measures.
The foundation’s president, T N Raghunatha, emphasised the severe impact on depositors, stating: “The petition highlights the plight of depositors who are unable to access their savings, which has impacted the daily lives, including medical expenses and education of family members. The depositors are suffering due to fraudulent activities perpetrated by the bank’s management, rather than any mismanagement on their own part.”
One of the primary concerns raised is the inadequacy of the ₹5 lakh deposit insurance coverage, which is significantly lower than many depositors’ total savings. Reports suggest that some bank officials have been pressuring customers to accept the insurance payout without providing clarity on the remaining funds.
The petition also questions how a fraud amounting to ₹122 crore could destabilise a bank with total deposits of ₹2,436 crore as of March 2024. This has led depositors to suspect the existence of additional financial discrepancies, including undisclosed NPAs or further fraudulent activities.
The investigation has led to further arrests, with the latest being businessman Javed Azam. Azam, aged 48 and engaged in electrical goods distribution, was arrested by the EOW of Mumbai police on Monday night. This marks the seventh arrest in the case.
Authorities have traced ₹18 crore received by Azam through Unnathan Arunachalam, another accused in the scam. Investigations further revealed that Unnathan and his father, Manohar Arunachalam, siphoned off ₹33 crore from the bank.
The prime accused, Hitesh Mehta, allegedly provided ₹15 crore to Manohar Arunachalam in 2019, followed by another ₹18 crore, which was eventually handed over to Azam.
Authorities have identified additional suspects, including former bank chairman Hiren Bhanu and ex-vice-chairperson Gauri Bhanu, both of whom reportedly fled abroad before the scam was exposed.
In a bid to ascertain further details, the Mumbai police recently conducted a polygraph (lie detector) test on Hitesh Mehta. According to reports within the EOW, the test results indicate possible deception in Mehta’s responses, prompting authorities to expand their probe into undisclosed financial transactions.
With several suspects still at large and financial irregularities under further scrutiny, investigators expect more arrests in the coming days.
As depositors grapple with uncertainty, the petition urges the RBI to provide greater transparency regarding the findings of its audits on the New India Co-Operative Bank’s financial status. The crisis, as the petition states, “is not just a financial issue but a matter of livelihoods and security for thousands of families.”
This case underscores the broader concerns surrounding cooperative banking governance and regulatory oversight, reinforcing the need for robust fraud detection mechanisms and depositor protection policies to prevent such crises in the future.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Mar 19, 2025, 1:53 PM IST
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