Why can’t depositors get their money back from mumbai’s new India cooperative bank? What’s the fraud?

EOW named as Mumbai Police’s Economic Offence Wing haves arrested Hitesh Mehta, former head of accounts and general manager of the New India Cooperative Bank, last week for allegedly siphoning off Rs 122 crore from the bank’s safe. Also arrested was developer Dharmesh Paun for allegedly helping Mehta transfer the looted money.

The Reserve Bank of India (RBI) then put limits on withdrawals from banks, prompting depositors to stand in line to get their money.

In the fraud, who are the main players?

Hitesh Mehta, who dealt with cash at the Prabhadevi and Goregaon branches, has confessed to having embezzled the funds. He has also said that he took money from both branches and gave it to Dharmesh Paun, who allegedly helped him to transfer the money using his business. Mehta and Paun have been arrested but Unnanathan Arunachalam, another suspect who is believed to have helped him in the money theft, is still at large.

How did the fraud get found and looked into?

Then, Mehta took bank and RBI officials to different places and distributed Rs 50 lakh of the looted money, he said, promising to return the balance.

He narrated his role to Mehta and a case was registered at the Dadar police station. The probe was taken over by the EOW after a case was registered.

Also Read: At what point should you withdraw your funds from all small- and mid-cap funds?

Which sections are being invoked?

The FIR was registered under sections 316(5) (criminal breach of trust by a public servant or banker, merchant, broker, attorney or agent) and 61(2) (criminal conspiracy) of the BNS.

Has the RBI taken any action?

The RBI has put restrictions on the bank because of concerns over its financial soundness. For a period of six months, from the close of business on February 13, it will not be allowed to make investments, give out new loans, borrow money or allow withdrawals.

The bank's board of directors has also been replaced by the RBI for a period of 12 months on account of “poor governance standards. ” Shreekant, a former chief general manager of State Bank of India, has been appointed administrator of the bank, who will run its affairs with the assistance of an advisory committee, the RBI said.

Also, the restrictions do not allow the bank to make investments, incur liabilities, accept new deposits, grant or renew loans or make payments without written approval from RBI.