Kochi: The cooperative movement has been a bliss for the ordinary people in Kerala for the last about a century. Cooperative banking has played a significant role in the social and economic life of the state. Poor and middle-income groups people found a saviour in the cooperative banking sector. They got help in constructing their homes, which is their dream, the marriages of their daughters, education of their children, treatment for illness, etc. But, when frauds cropped into that sector it turned grave, fatal and sharp thorn in the flesh for the people who had thrown their hats into it. It was like a face-to-face standoff between themselves and their death.
The bolt from the blue came up in the form of huge loan fraud detected in CPM-ruled Karuvannur Cooperative Service Bank in Irinjalakkuda, Thrissur. It is a heavy embarrassment to CPM since Party has been campaigning against the so-called “Union Government’s intrusion into Kerala’s cooperative sector”.
According to preliminary information, the bank’s secretary and the staff siphoned off more than Rs 100 Cr using the title deeds submitted by the loan applicants. But, V.D. Satheeshan, LoP, Kerala Legislative Assembly, told that it is more than Rs 350 Cr. The case has been registered on the basis of the complaints lodged by K.K Divakaran and Sreekala E.S., bank’s president and secretary in-charge respectively.
Bank has suspended Secretary, Manager and Accountant. Actions are also initiated against Commission Agent, a supermarket staff and a businessman. Interestingly fraud had been engineered at multi-levels. At the first level, the fraudsters have taken multiple loans using the collateral submitted by an applicant who gets only a limited amount. Reports suggest that the applicant for small amounts of loans are now having loans of crores of rupees as per the books! Another level is loans granted against the inflated value of the collateral. Some staff obtained loans above the permissible level under the existing laws. Some of them have gone beyond the level of the permissible limit of Rs 50 lakhs and obtained Rs 25 Cr. It is a housing loan or employee’s overdraft!
Law says, cooperative banks can disburse loans only up to 70% of deposits in their cupboard. But, this particular bank disbursed about 110%.
Karuvannur Cooperative Service Bank was ranked as one of the topmost banks of that sort in the state. NPA was too low. Profit on paper until 2018 was fantastic. But, the situation changed after 2018; repayment slowed down those days. Hints of fraud came to surface during the inspection carried out. Following audits threw light on larger dimensions of the fraud. Customers started to withdraw their deposits when they got wind of the fraud. Bank men say, deposits fell from Rs 410 Cr to Rs 310 Cr. That happened in a short period of one and half years. Joint Registrar of the State Cooperative Department Mohan Mon said that steps have been taken to recover the lost fortunes by auctiing the surrendered collateral properties. Replying to question regarding the dissolution of the Director Board he said that certain procedures have to be followed before taking such actions.
Now CPM men are in the blame game. Some CPM men accuse the former minister from the district and former district secretary of the party of this fiasco.
By this time BJP came to the forefront. State Secretary A. Nagesh stated, they would send complaints to Union Home Minister Amit Shah who presides the Union Cooperation Ministry. They would also complain to IT Department and ED regarding this novel kind of fraud.
Even though the Karuvannur Bank case is more than a year old, it drew massive attention in the wake of the death of Philomena (70) in July, 2022. Bank failed to return her life-long savings of Rs 28 lakhs hence she could not undergo treatment for her prolonged serious illness.
The cooperative sector in Kerala faces a’ trust crisis’ after the serious scams of Karuvanuur Cooperative Bank and Palakkad Kannambra Service Cooperative Bank, Palakkad district.
Another cooperative bank scam from Thiruvalla, Pathanamthitta district is in the wind. CPM leader and State Cooperation Minister V.N. Vasavan said in reply to a query raised by an MLA in the state assembly that 164 cooperative institutions across the state have failed to refund deposits to customers even after their maturity period. He also said that a total of 399 cooperative banks and societies across the state have reported financial irregularities. Reports say that there are approximately 15,000 cooperative societies in the state.
The poor people deposit their hard-earned money in cooperative banks due to several reasons. Excellent rapport with local bank authorities is one among them. More interest rate, compared to nationalised banks, is another important reason. They save this money for the ‘rainy days’ of their life, thanks to their shoestring budgets.
But the scammers cheat them through plotting conspiracies, forging fake documents and abusing power and position.
Urgent government intervention is the need of the hour. But, it is a wishful thought as most of such banks are controlled by the ruling CPM.
There are several modus operandi the fraudsters practise. One bank sanctioned a loan of Rs 1 Cr against the names of 15 persons, most of them in ‘benami’ name. There are 32 cases of loans without pledging any jewellery as collateral and the total loss is Rs 85 lakhs. Another bank granted loans against properties with an overrated price. At last, it was found to be a wasteland. In another case, an applicant took a loan of Rs 10 lakhs and repaid it on time. But, he was shocked, the book showed his loan amount as Rs 20 lakhs! A ruling member had siphoned off Rs 10 lakhs! Misappropriation of funds was detected at the Palakkad Kannambra bank. Reports suggest it was Rs 5.76 Cr. There are reports that inquiry found Rs 1 Cr was extended as an advance to the CPM-controlled Uralungal Labour Contract Cooperative Society to carry out construction activities. In some cases, banks give loans against the receipt of fake FDs. In some banks, crores of rupees disappear without a trace.
In another bank, an employee syphoned off Rs 25 lakhs from the account of depositors sans their knowledge and transferred the amount to her daughter’s account!
Several questions arise: Why are frauds not detected in auditing? Why do they come out only when depositors scream for justice? Why is professionalism deliberatively kept away from the cooperative banks? Who shot down the proposal for a common software for the societies? Many auditors are not computer-literate and how can such men trace fraud engineered by the staff who are using computers for their job? Another joke is the Vigilance Wing to prevent corruption. The police officer not less than a DIG should lead the Wing. But he needs the nod of a Cooperative Registrar before he goes to probe. And the Registrar is a junior (most) IAS officer! How can a DIG go for it? And, RTI Act is not applicable to societies!
In short, the cooperative sector in Kerala is in nose-deep corruption. And, the fraudsters are under the powerful patronage of omnipotent political masters and most of them are CPM leaders. Most of the cooperative institutions in the state are CPM-controlled. It is a large employer to the party men and fertile recruitment ground for the Party rank and file. As everybody knows, Party is the largest employer in the state, second only to the Government of Kerala. The cooperative sector is the major contributor in this regard hence CPM can never run away from the responsibility for this blatant crisis. They should stop blaming ‘2018 floods’ and ‘Demonetisation 2016’ for the grave situation the poor investors are trapped in.