A cartel of 25 people benefited by Rs. 758-crore loans
Minal Khopkar’s 80-year-old mother needs immediate knee replacement surgery. But it cannot take place as Ms. Khopkar, a resident of Pen in Maharashtra’s Raigad district, cannot access her accounts with the Pen Co.op Urban Bank Ltd though she has three fixed deposits for Rs. 20 lakh. The Kotwalvadi Trust, working for tribal children in the district, has been writing letters to numerous state authorities, urging release of its Rs. 8 lakh trapped in the bank. These are not isolated examples. All 1,95,775 account holders have been saying the same thing for the past two years.
The man allegedly responsible for their sufferings and alleged mastermind of a Rs. 758-crore scam in the bank, Shishir Dharkar, former Nationalist Congress Party leader and former chairman of the bank, lavishly celebrated the wedding of his daughter in Mumbai four months ago. A few months before this event, Vibhavari Bhave, 55, tried to commit suicide as she could not withdraw her husband’s lifetime savings of Rs. 26 lakh from the bank.
Except the arrest here last Monday of internal auditor Sunil Dutt Sharma, who overlooked the financial irregularities of the bank for the past 10 years, no concrete action has yet been taken to provide justice to the victims of the financial scam.
A CBI investigation in 2010 into the alleged cheating to the tune of Rs. 480 crore by bank officials of the Mineral Scrap Trading Corporation (MSTC), a government of India enterprise under the Steel Ministry, threw up the Rs 758-crore scam. Now, two years later, the victims, mostly from poor and middle class families, await justice from the Finance Ministry, while the perpetrators remain untouched. The demand to merge the Pen Co.op Urban Bank with a nationalised bank has been pending with the Ministry.
The CBI report showed that Mr. Dharkar was instrumental in mortgaging the assets of the bank for securing the advance of Rs. 480 crore from MSTC. Following the report, the Reserve Bank of India swung into action in September 2010. The same month, the Board of Directors (BoD) was removed and three administrators were appointed by the Commissioner for Cooperation and Registrar of Cooperative Societies.
A re-audit, ordered by the administrators, exposed the fake figures of profit presented by the bank. It had suffered a loss of Rs. 403 crore in 2008-09 and Rs 651 crore in the next financial year. The BoD had kept the fact hidden from the depositors. It also became clear that the board had disbursed Rs 758-crore loans to 128 individuals and companies without any paperwork or mortgage during the financial years 2008-09, 2009-10 and 2010-to September 2010. On closer investigation, it was found that a cartel of 25 people formed different companies and were beneficiaries of the loans.
“The Board of Directors jointly and severally failed to exercise control and supervision over the sub-committees and overall control and manage the affairs of bank in the interests of shareholders, depositors and the public by violating various guidelines issued by RBI in various circulars,” said the re-audit report, prepared by Kirtane and Pandit. On a writ petition filed by the depositors, the Bombay High Court stayed sale of the bank’s immovable properties. It also issued orders not to cancel the bank’s licence without its prior permission, but the RBI on February 10, 2012 issued notice revoking the licence. The Pen Co.op Urban Bank Ltd had been set up in 1935 and was duly registered under the provisions of the Maharashtra Co-operative Sector Act, 1960. At present it has 18 branches, of which three are operating in Mumbai and the rest in neighbouring Raigad district, where the bank originated. In total, the bank has 1,95,775 depositors, the deposits amounting to Rs 664 crore.
Naren Jadhav, executive president of the Pen Urban Bank Thevidar Khatedar Sangharsh Samiti, formed by the depositors to represent them, blames RBI officials. “How can they classify the bank as grade 2 in the first place? It clearly means the RBI officers were also hand in glove with the BoD and other staff members of this bank,” he said.
“Cancelling licence is the first step towards liquidation of the bank and we do not want it at all,” said Mr. Jadhav. There are accounts of educational institutes, credit societies, trusts, religious committees, housing societies and even the Pen Municipal Council with the bank. “Thousands of people are dependent on this money. Liquidation will further jeopardise the chances of the depositors getting money back. We have requested the Finance Ministry to revoke licence cancellation and to allow merger of the bank with a nationalised bank,” he said.
“I had saved money for my mother’s operation. Why can’t I use my money? Why are we being punished for the crime committed by others?” asks Ms. Khopkar.