RBI Ignored Early Warnings In New India Cooperative Bank’s Financial Fraud

A damning report from IndianCooperative.com has revealed that former employees of New India Cooperative Bank Ltd had alerted the Reserve Bank of India (RBI) in January 2020 about widespread corruption, financial mismanagement, and fraudulent loan practices within the bank.

The employees sent a letter to RBI’s Department of Regulations, detailing serious irregularities under the bank’s chairman, Hiren Bhanu.

Their concerns included unethical loan approvals, nepotism, and cover-ups of fraudulent activities.

Fraudulent Loan Approvals and NPAs

The report highlights a pattern of reckless lending and loan write-offs that severely impacted the bank’s financial health.

Before 2010, the bank focused on small-ticket loans for priority sectors. However, after Bhanu took charge, the bank began issuing corporate loans of up to ₹25 crore without proper approvals.

Many of these loans turned into NPAs within a year, with funds allegedly being diverted through other banks.

Notable Loan Write-Offs & Suspicious Deals

The whistle-blowers highlighted several controversial loan write-offs and fraudulent transactions, including:

• Bollywood actress Preity Zinta’s ₹18 crore loan was written off without following due recovery procedures.
• Rajhans Group received ₹95 crore in loans, while ₹210 crore in NPAs was sold to Omkara Assets Reconstruction Pvt Ltd (ARC) under suspicious circumstances.
• A ₹7 crore loan was granted to ACAIPL, a sister company of Omkara ARC, allegedly without due diligence.
• Loans were sanctioned based on inflated valuation reports, benefitting Bhanu’s close associates.

Workplace Corruption And Forced Resignations

The letter also accused the bank’s leadership of targeting senior employees and promoting nepotism:

• Over 80 senior staff members were forced to resign in 2019.
• Relatives of top management received rapid promotions, despite lacking banking experience.
• Fraud committed by insiders was covered up instead of being punished.

RBI’s Alleged Negligence Or Cover-Up?

Despite these clear warning signs, RBI failed to act for over four years, allowing the bank’s financial health to deteriorate. Financial reports since 2021 showed alarmingly high cash balances, while reserves with other banks dwindled to zero-a clear red flag.

RBI conducted annual inspections but did not raise any alarms about these irregularities.

This raises troubling questions: Was this sheer incompetence, regulatory negligence, or a deliberate cover-up?

Financial Crisis Deepens: Missing Cash & RBI’s Late Action

The bank has suffered back-to-back losses, posting:

• ₹23 crore in losses (FY23-24)
• ₹31 crore in losses (FY22-23)

Despite a slight increase in deposits (₹2,436 crore in 2024 vs. ₹2,406 crore in 2023), its advances shrank to ₹1,175 crore from ₹1,330 crore.

Shockingly, New India Cooperative Bank’s 2023 audited financials reported ₹122 crore in cash, increasing to ₹135 crore in 2024-but RBI’s latest action suggests the money was missing.

Whistleblower’s Final Question

A whistleblower close to the case has posed a final, unsettling question:
“Is this just regulatory failure, or is there a much bigger financial crisis within the bank that is being downplayed?”

With RBI now taking belated action, the full extent of the fraud remains to be uncovered.

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