Daijiworld Media Network - Mumbai

Mumbai, Oct 6: The Enforcement Directorate (ED), Mumbai Zonal Office-II, conducted search operations at nine locations in Maharashtra’s Yavatmal district under the Prevention of Money Laundering Act (PMLA), 2002, and unearthed an alleged Rs 242-crore fraud involving officials of Babaji Date Mahila Sahakari Bank Ltd and its borrowers.

According to an ED statement, the investigation was initiated on the basis of multiple FIRs registered by Avdhutwadi Police Station in Yavatmal against bank officials, employees and borrowers.

The bank was originally registered under Section 9(1) of the Maharashtra Cooperative Societies Act, 1960. Its licence was cancelled by the Reserve Bank of India (RBI) in 2022 following complaints alleging fraud and misappropriation of depositors’ money. The state government subsequently ordered a special audit.

The audit found that the CEO, chairperson, directors and other bank officials, allegedly in connivance with borrowers, valuers and auditors, had sanctioned and disbursed loans without adequate collateral and without properly assessing the repayment capacity of borrowers.

The loan funds were subsequently diverted in violation of the bank’s bye-laws, loan policy and RBI guidelines, the ED said.

Investigators found that a fraud amounting to Rs 242 crore had been committed by the chairperson and bank officials in collusion with loan beneficiaries. The local law enforcement agency has already filed a chargesheet in the case.

The searches revealed a large nexus between bank officials and borrowers in the alleged fraud. According to the ED, loan funds were siphoned off for personal use, withdrawn in cash, used for evergreening of loans and transferred to accounts of bank officials as kickbacks.

The officials also allegedly used the credentials of existing borrowers to open dummy loan accounts, manipulated the valuation of mortgaged properties and siphoned off the loan amounts obtained through such accounts.

A large number of incriminating documents, including property papers, were seized during the searches, the agency said.

Further investigation is in progress.

The case points to alleged systemic lapses in the functioning of the cooperative bank and alleged collusion between its management and beneficiaries, resulting in diversion of public funds on a significant scale.