A huge financial scandal has shaken New India Cooperative Bank, with the arrest of Hitesh Mehta, the bank’s general manager and head of accounts, for allegedly embezzling Rs 122 crore. The New India Cooperative Bank Fraud has raised many questions about the role of the bank and the Reserve Bank of India (RBI) in preventing such incidents. While this case may seem like a simple fraud, it’s a symptom of deeper problems that affect many cooperative banks across India.
Let’s break down the key details and what it means for customers and the banking system as a whole.
Early Signs of Trouble: Why Didn’t Anyone Notice?
Financial Red Flags Ignored by RBI
According to insiders and whistle-blowers, the New India Cooperative Bank Fraud didn’t happen overnight. There were signs of financial problems in the bank for years. Since 2021, the bank’s financial reports showed unusually high cash balances, while its reserves with other banks were almost gone. These should have been red flags for both the bank and the Reserve Bank of India (RBI), which inspects banks regularly.
Despite these warnings, RBI never flagged these issues during their annual checks. This raises the question: Was it just negligence, or is there more to the story?
Struggling with Losses: A Bank in Trouble
Financial Struggles of New India Cooperative Bank
New India Cooperative Bank has been facing tough financial times in recent years. Here are some key details about its financial position:
- In FY 2023-24, the bank posted a net loss of Rs 23 crore.
- The net loss for the previous year (FY 2022-23) was Rs 31 crore.
- The bank’s advances (loans) fell from Rs 1,330 crore in March 2023 to Rs 1,175 crore in March 2024.
- Deposits grew only slightly, from Rs 2,406 crore to Rs 2,436 crore.
These financial struggles, combined with the missing funds, indicate something much deeper than simple fraud.
The Missing Cash: What Really Happened?
The bank’s 2023 audited financials reported Rs 122 crore in cash on hand. By 2024, this number increased to Rs 135 crore. However, investigations have revealed that this cash might not even exist. It is now suspected that the bank may have had no cash in its vaults at all.
This raises serious concerns: How could the RBI miss these discrepancies year after year?
The Delay in Action: What Took RBI So Long?
RBI’s Response to the Fraud
One of the most concerning parts of this scandal is the delay in RBI’s actions. After completing a cash verification in February 2025, RBI didn’t immediately freeze the bank’s transactions, allowing more deposits and withdrawals to happen for over 24 hours. This delay left many depositors in a vulnerable position.
A whistle-blower pointed out that the same RBI officials had inspected New India Cooperative Bank for years and failed to raise concerns about its financial state. Some of these officials even have links to the notorious PMC Bank scam.
What Does This Delay Mean for Customers?
The RBI’s delayed response raises questions about its internal processes. Were these delays intentional, or was it just incompetence? Either way, depositors were left exposed to the risks of this fraud.
Investigation and What We’ve Learned
A Bigger Financial Scheme Uncovered
The investigation revealed that Hitesh Mehta allegedly diverted Rs 70 crore to a real estate developer, Dharmesh Paun, for a slum rehabilitation project in Kandivali, Mumbai. Both Mehta and Paun have been arrested, but many are still wondering how this fraud went unnoticed for so long.
If regular inspections were taking place, how did this massive fraud continue undetected? Is this an issue of poor oversight by RBI or something more serious?
RBI’s Response: Taking Action After the Scandal
What Has RBI Done So Far?
After the fraud was uncovered, RBI took action by imposing strict operational restrictions on New India Cooperative Bank. Some of the steps taken include:
- Superseding the bank’s board of directors for the next 12 months.
- Appointing Shreekant, a former Chief General Manager at SBI, as an administrator to manage the bank during this time.
- Prohibiting the bank from granting or renewing loans, accepting deposits, or incurring new liabilities without prior approval from RBI.
These actions aim to stabilize the bank, but they also mean that depositors have limited access to their funds, leading many customers to rush for withdrawals.
Protecting Deposit Holders
To protect depositors, RBI has confirmed that customers are eligible to receive insurance of up to Rs 5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961. If you have funds with New India Cooperative Bank, you should check the DICGC website or contact the bank directly for more information.
What This Means for the Future of Cooperative Banks
The New India Cooperative Bank Fraud highlights some major issues with both the bank’s operations and RBI’s oversight processes. If such a large-scale fraud can go undetected for so long, what does this say about the state of the cooperative banking sector in India?
How Can We Prevent Future Scams?
This case emphasizes the need for:
- Better oversight of cooperative banks by RBI.
- Increased transparency in financial reporting.
- Stronger accountability for both bank officials and regulatory bodies.
It’s crucial for banks and their regulators to learn from this scandal and ensure that depositors’ money is safe. At Banksconnect, we are committed to providing you with the latest updates on the banking sector and the steps being taken to prevent such frauds in the future.
Key Takeaways:
- Hitesh Mehta, the general manager at New India Cooperative Bank, is accused of embezzling Rs 122 crore.
- Despite warning signs, RBI’s inspections failed to identify the fraud.
- The investigation revealed that funds were diverted to a real estate project by Mehta.
- RBI imposed restrictions on the bank and appointed an administrator to manage its affairs.
- Depositors are protected under the DICGC insurance scheme, with claims up to Rs 5 lakh.
For further details on this ongoing case or to learn more about deposit insurance, check out Banksconnect for the latest updates.
