New India Co-operative Bank fraud: Mumbai Police arrests ex GM for siphoning ₹122 crore from Treasury amid RBI curbs

The Mumbai police have registered a case against the New India Cooperative Bank’s General Manager and Head of Accounts along with his associates for allegedly embezzling ₹122 crore of funds, officials said on Saturday. The case has been transferred to the Economic Offences Wing (EOW) of the city police for further investigation, an official said. The Reserve Bank of India (RBI) on Thursday imposed several restrictions on the cooperative bank, including on withdrawal of funds by depositors, citing supervisory concerns emanating from the recent material developments in the bank, and to protect the interest of its depositors. 

On Friday, the RBI superseded the lender’s board for a year, and appointed an administrator to manage affairs and also appointed a committee of advisors to assist him. 

The police official said, “Acting Chief Executive Officer of the bank, Devarshi Ghosh, on Friday approached the Dadar police station in central Mumbai and lodged a complaint of misappropriation of funds.” 

“As per the complaint, the bank’s general manager and head of accounts, Hitesh Mehta, along with other associates hatched a conspiracy and embezzled ₹122 crore from the money kept in the safes of Prabhadevi and Goregaon offices of the bank,” he said.

Based on the complaint, a case under the Bharatiya Nyaya Sanhita (BNS) sections 316 (5) (criminal breach of trust by public servants, bankers, and others in positions of trust), 61(2) (criminal conspiracy) was registered against Mehta and others, he said. Considering the scope of the investigation, the case was then transferred to the EOW, he said, adding that the agency has launched a probe.

Most of the 28 branches of this cooperative bank are located in the Mumbai megapolis, and it also has two branches at Surat in neighbouring Gujarat and one in Pune. The RBI’s action against the bank triggered panic among its customers, who thronged its branches since morning on Friday hoping to access their savings, but were denied entry into the premises.

RBI’s action against New India Co-operative Bank 

The Reserve Bank of India (RBI) on Friday, February 14, superseded the board of Maharashtra-based New India Co-operative Bank for 12 months, one day after imposing several restrictions, due to poor governance standards and irregularities in its lending business. The RBI has barred account holders and depositors from withdrawing money from the lender for six months.

According to the official statement, the RBI has appointed Shreekant, a former Chief General Manager of the State Bank of India (SBI), as the administrator to manage the affairs of New India Co-operative Bank.

The central bank has also appointed a ‘Committee of Advisors’ to assist the Administrator in discharging his duties. The members of the Committee of Advisors are Ravindra Sapra (former General Manager, SBI) and Abhijeet Deshmukh (Chartered Accountant). 

The action was necessitated “due to certain material concerns emanating from poor governance standards observed” in the Mumbai-headquartered bank. The bank’s chief compliance officer (CCO) approached the Mumbai Police’s Economic Offence Wing after discovering some lapses in the RBI’s ‘spot inspection’ of its books. 

According to reports, the issue pertains to the misappropriation of funds by some bank staff members. On Thursday, the RBI prohibited the bank from issuing new loans and suspended deposit withdrawals and superseded the bank’s board for mismanagement on Friday.

The restrictions came into force at the close of business on Thursday, will remain in force for six months, and are subject to review. “Considering the bank’s present liquidity position, the bank has been directed not to allow withdrawal of any amount from savings bank or current accounts or any other account of a depositor,” the RBI said while imposing the restrictions.

However, the lender has been allowed to set off loans against deposits subject to the conditions stated in the RBI directions. It may also incur expenditures on certain essential items such as employee salaries, rent, and electricity bills.

The RBI said that as of the close of business on February 13, the bank shall not, without prior approval, grant or renew any loans and advances, make any investment, or incur any liability, including acceptance of fresh deposits. It said the directions were necessitated due to supervisory concerns emanating from the recent developments in the bank and to protect the interest of bank depositors.

According to reports, over 90 per cent of the city-based bank’s 1.3 lakh depositors have up to ₹5 lakh in their accounts, and will be in a position to get their entire money by way of deposit insurance. The bank’s chief compliance officer (CCO) approached the Mumbai Police’s Economic Offence Wing on Thursday following the discovery of some lapses in a ‘spot inspection’ of its books by RBI.

As of March 2024, the bank had 28 branches. Its overall assets decreased to ₹1,175 crore from the year-ago period’s ₹1,330 crore, and the gross non-performing assets ratio increased to nearly 7.96 per cent as of March 31, 2024. Most of the bank’s 28 branches are located in the Mumbai megapolis, and it also has two branches at Surat in neighbouring Gujarat and one in Pune.

The overall deposit base increased marginally to ₹2,436 crore at the end of FY24 from ₹2,406 crore in the year-ago period. According to the bank’s annual report, over two-thirds of the deposits are term deposits. The bank was started in 1968 by a state-run general insurer staffers with a similar name.