New India Coop Bank vault had room for Rs 10 cr but book showed Rs 122 cr: EOW

New India Cooperative Bank's Prabhadevi branch in Mumbai had a capacity to hold Rs 10 crore at a time, but the cash in hand book showed there was Rs 122.028 crore in the safe on the day of the RBI (Reserve Bank of India) inspection, police have said.

Mumbai Police's economic offences wing (EOW) is conducting a probe into the embezzlement of Rs 122 crore from the bank, and has so far arrested three persons, including two former top executives of the lender.

The RBI inspection team visited the corporate office branch of the bank at Prabhadevi on 11 February, when they found Rs 122 crore in cash was missing from the safe, an official said on Tuesday.

The balance sheet at the corporate office branch was showing Rs 133.41 crore in the bank's safe at the Prabhadevi and Goregaon branches, and Rs 122.028 was the figure on the balance sheet of the Prabhadevi branch on that day, he said.

During the probe, the EOW found the capacity of the safe at the corporate office to store cash was only Rs 10 crore, and they actually found Rs 60 lakh in the vault. At the Goregaon branch safe, they found Rs 10.53 crore cash on the day of the RBI inspection, according to the official.

The vault at the Goregaon branch also had a capacity to store Rs 10 crore. The EOW is now probing why auditors looking into the bank's financial records did not raise an alarm over the missing cash from the bank, he said.

Various CA firms audited the balance sheets, daily reports, and the books of cash in hand. It was their role to verify the cash, which was kept in the safe, he said.

Meanwhile, the EOW has summoned representatives of half-a-dozen firms which conducted audits of the fraud-hit lender at different times, another official said. These financial services firms were involved in statutory, concurrent or internal audits from 2019-24, the period when the alleged embezzlement took place, he said.

As the initial audit of the lender was done by M/s Sanjay Rane Associates, a partner in the firm, Abhijeet Deshmukh, has been interrogated by the EOW for the last four days. Now, the probe agency has summoned another partner in the chartered accountancy firm, Sanjay Rane, to record his statement, the official said.

Representatives of all auditing firms linked to the lender have been called from Wednesday onward to record their statements, the official said. "If needed, the EOW will seek forensic audit of the bank's financial records to ascertain how Rs 122 crore was misappropriated," he said.

The bank's former CEO Abhimanyu Bhoan, who is among three persons arrested so far for the alleged fraud, had signed all audit reports and balance sheets of the bank, the official said. Bhoan was part of the conspiracy as he was aware how much cash was in the bank's vaults, the official also said.

Besides the former CEO, the bank's ex-general manager Hitesh Mehta and real estate developer Dharmesh Paun have been arrested in the case.

The alleged misappropriation of funds came to light following an inspection by the RBI. As per the police, the bank’s acting CEO Devarshi Ghosh lodged a complaint against Mehta and others at Dadar police station in central Mumbai nearly two weeks ago for alleged misappropriation of the lender’s funds.

Based on the complaint, the police registered a case and the probe was transferred to the EOW. The complainant alleged that Mehta and his associates hatched a conspiracy and embezzled Rs 122 crore from the safes of the Prabhadevi and Goregaon offices of the bank.

A case under sections 316 (5) (criminal breach of trust by public servants, bankers, and others in positions of trust) and 61(2) (criminal conspiracy) of the Bharatiya Nyaya Sanhita (BNS) has been registered. The RBI has superseded the cooperative lender’s board for a year and appointed an administrator to manage its affairs.

As early as January 2020, former employees of the bank had alerted the RBI about rampant financial irregularities and corruption within the bank. In a letter to the executive director of RBI's department of regulations, these whistleblowers detailed instances of financial mismanagement, unethical practices, and preferential treatment given to certain borrowers.

The letter further alleged that over 80 senior staff members were forced to resign in 2019, with family members of senior executives securing privileged promotions despite lacking banking experience. The employees had urged RBI to conduct a forensic audit, dissolve the board of directors, and recover losses from the personal assets of directors and management.