New Delhi, Jul 5 (IANS): The Enforcement Directorate (ED) on Wednesday said that Amar Sadhuram Mulchandani, the former Chairman of Seva Vikas Co-operative Bank, has been arrested under the provisions of the Prevention of Money Laundering Act.

He was produced before a special PMLA court which sent him to ED's custody till July 7.

The official said that the arrest was made in connection with the ongoing investigation in the Seva Vikas Co-operative Bank fraud case in which the Bank has suffered a loss of Rs 429 crore in 124 NPA loan accounts.

This has caused the bank to go bankrupt causing loss to thousands of small depositors. The ED initiated PMLA investigation based on multiple FIRs registered in Pune against Mulchandani and other directors, officials and loan defaulters.

"Investigation has revealed that the bank was being run like a family proprietorship by Mulchandani. And he treated public deposits in the Bank like his personal fiefdom and violated all prudent banking norms to illegally sanction loans to his favoured borrowers in arbitrary manner, without checking their creditworthiness and without adequate collateral securities.

"He also took bribes at the rate of 20 per cent commission of the sanctioned loan amounts," the official said.

The ED said that Mulchandani made his family members as Directors in the bank with a clear motive to have a brute majority in the Board of Directors to sanction loans as per his whims & fancies.

More than 92 per cent of the loan accounts had turned NPA which ultimately led to the collapse of the bank.

RBI has cancelled the license of the bank. Earlier properties worth Rs 122.35 crore were provisionally attached in this case including various benami assets of Amar Sadhuram Mulchandani.

Further investigation in the case is under progress.