Another cooperative bank is again at the centre of a financial scandal, with the arrest of Hitesh Mehta, general manager and head of accounts at New India Cooperative Bank, for allegedly siphoning off Rs122 crore. However, what appears to be a simple case of embezzlement could, in reality, be a symptom of a much deeper institutional failure—one that raises serious questions about the role of the Reserve Bank of India (RBI) in detecting and preventing such frauds.
According to insiders and whistle-blowers, this fraud did not materialise overnight, nor was it carried out without signs that should have raised alarms long ago. The Bank's financial reports since 2021 have consistently shown abnormally high cash balances, while its reserves with other banks dwindled to nil. Despite these anomalies, RBI, which conducted annual inspections, did not raise any red flags. This makes the whistle-blower raise a troubling question: was this negligence, incompetence, or a deliberate cover-up?
New India Cooperative Bank has been grappling with losses in the past two fiscal years. During FY23-24 and FY22-23, the Bank had posted a net loss of Rs23 crore and Rs31 crore, respectively. According to a report from Reuters, New India Cooperative Bank's advances reduced to Rs1,175 crore as of 31 March 2024 from Rs1,330 crore a year earlier. Its deposits increased marginally to Rs2,436 crore from Rs2,406 crore.
New India Cooperative Bank's 2023 audited financials reported Rs122 crore in cash on hand which increased to Rs135 crore in 2024. However, RBI's latest action suggests that the entire sum was missing, leading to speculation that the Bank may have had no cash in its own vaults at all.
"If this was the case, why did the RBI only act now? Is there a deeper financial crisis within the bank that is being downplayed by shifting the narrative to a single scapegoat?" the whistle-blower says.
Mr Mehta has reportedly admitted to siphoning funds since 2020. If the fraud had been occurring for years, why did RBI fail to detect any discrepancies in its routine inspections, the whistle-blower says. "Why did the central bank suddenly act now despite the bank's financials remaining largely unchanged over the past years?"
According to the whistle-blower, the same officials from RBI reportedly inspected New India Cooperative Bank year after year and continued to give it a clean chit. One of these officials, according to reports, had previous links to the PMC Bank scam.
RBI reportedly completed its cash verification on 12 February 2025 but did not immediately freeze transactions. This delay of over 24 hours, according to the whistle-blower, allowed further deposits, possibly giving insiders a chance to withdraw funds. "If the RBI had already confirmed the cash was missing, why did it take so long to impose withdrawal restrictions? Who will be held accountable for depositors losing money during this critical window?"
Beyond New India Cooperative Bank's failures, RBI's handling of the case raises serious concerns about internal governance. "How could its officials miss such glaring discrepancies for years? Have systemic failures in oversight enabled fraudsters to exploit cooperative banks with impunity? Are some officials benefiting from their relationships with cooperative banks and turning a blind eye to misconduct?" the whistle-blower says.
Following the revelation of the fraud, the Mumbai police's economic offences wing (EOW) arrested Mr Mehta after questioning him for over three hours. The case was filed based on a complaint by Devarshi Ghosh, the Bank's acting chief executive officer (CEO).
Investigations later revealed that Mr Mehta had allegedly diverted Rs70 crore to a real estate developer, Dharmesh Paun, to finance a slum rehabilitation authority (SRA) project in Kandivali. Mr Paun has also been arrested and both men are currently in police custody.
The case is now under intense scrutiny, but the arrest of a few individuals does not answer the bigger questions about regulatory lapses. RBI's 'spot inspection' reportedly led to the discovery of 'some lapses', prompting the Bank's CEO to alert the authorities. However, given that inspections were conducted every year, why did it take a sudden 'spot check' to uncover this massive fraud?
The embezzlement of Rs122 crore from New India Cooperative Bank highlights the urgent need for accountability and transparency within the RBI's regulatory mechanisms. "If officials within the central bank can consistently fail to detect such blatant financial irregularities, it suggests either an alarming level of incompetence or deliberate collusion with fraudulent bankers," the whistle-blower says.
"The RBI cannot present itself as a belated saviour when its oversight failures contributed to this financial disaster. With depositors' hard-earned money at stake, real accountability—not just symbolic arrests—is necessary to prevent such scams from recurring," he added.
Last week, citing supervisory concerns and the lender's liquidity position, RBI imposed operational restrictions on the Mumbai-based multi-state scheduled bank. RBI also superseded the board of directors of New India Cooperative Bank for the next 12 months. It also appointed Shreekant, former chief general manager (CGM) of the State Bank of India (SBI) as administrator to manage the affairs of the Bank during this period. Further, to assist the administrator, RBI appointed a committee of advisers which includes Ravindra Sapra (former GM of SBI) and Abhijeet Deshmukh (chartered accountant-CA) as members.
Under these restrictions, New India Cooperative Bank is prohibited from granting or renewing loans, making investments, incurring liabilities (including borrowing or accepting deposits), or disbursing any payments without prior written approval from the RBI. However, due to these restrictions, several customers and depositors rushed to withdraw money but were left helpless.
When the regulator itself is compromised but hides the wrongdoer out of worry about its own image then we have such obvious frauds.
No entity is without its black sheep. Has the RBI disciplined any of its personnel for failing to detect lapses? No names needed, just how many have been disciplined each year for the last 5 years when there has been an alarming discoveries of frauds?