Forty of 50 cooperative banks in Uttar Pradesh hit by fraud; loan amounts forged, subsidy money siphoned off

New Delhi: This is a classic case of swindling of taxpayers money by bank officials that took place during the erstwhile regime of Mayawati and Akhilesh Yadav, which was buried in the files until now.

A recent probe has unearthed that at least 40 of the total 50 cooperative banks in Uttar Pradesh have been hit by fraud involving various modus operandi like forging loan amounts, siphoning of subsidy money from beneficiary accounts in connivance with bank officials, fictitious fixed deposits and embezzlement of money recovered from the accounts declared as Non-Performing Assets (NPAs).

Cooperative and regional rural banks play a crucial role in the rural financial system of the country and are expected to take care of the expanding and diverse credit needs of agriculture and rural development. More than 50 percent of the rural credit is disbursed by the cooperative banks and the National Bank for Agriculture and Rural Development (NABARD) is responsible for the regulation and supervising of the functions of these banks.

Documents accessed by Firstpost reveal that almost all the 46 branches of Zilla Sahkari Bank in Muradabad have been hit by fraud. At least four of the 19 branches of the Aligarh Zila Sahkari Bank Limited have also been compromised. A committee which was constituted to investigate the fraud discovered that Rs 9.5 crores were swindled through fake loans and more than Rs 1.70 crore was siphoned off from saving accounts. A detailed questionnaire sent to MVS Rami Reddy, principal secretary, Uttar Pradesh Cooperative Department and Jiji Mammen, chief general manager, NABARD remained unanswered.

 Forty of 50 cooperative banks in Uttar Pradesh hit by fraud; loan amounts forged, subsidy money siphoned off

Representational image. Reuters.

According to the internal investigation team, the fraud started during the Bahujan Samaj Party regime in 2011 and various methods were used for fund embezzlement like loan amounts were released without obtaining details of borrowers, fixed deposits were closed before maturity and amount transferred to certain fraud accounts in a pool. Term loans were arranged fraudulently and the amount was transferred to third-party accounts and subsequently siphoned off through cash payments and online transfers.

The investigation team uncovered fraud in 157 saving bank accounts. The report further said that agriculture loans were disbursed to 1,961 farmers from 2010 to 2015, covering the BSP and Samajwadi Party rule. However, during the investigation last month, none of these 1,961 ghost farmers could be traced or identified.

“All the fraudulent transactions have been made without preparing proper debit/credit vouchers and without any mandate of account holders. Signatures/photographs/KYC were not uploaded in any accounts in the prevailing accounting system as no account opening forms were available.

"Fraudulent accounts have been opened without the consent and knowledge of depositors. Fictitious/fake loans have been arranged and term deposit accounts have been closed before maturity by crediting into pool fraudulent accounts. The statutory audit of the branch for the period 2010-11 to 2015-16 was conducted by M/S VAA Associates, Agra but serious lapses like missing entries in the cash book, vouchers not being prepared for many transactions, KYC documents not being taken, loan files missing have not been reported by them. The internal inspection of the branch was conducted by the head office during the fraud period on 28 March 2015 but no suspicious activity or irregularity was reported by the inspecting team,” the investigation report said.

On 7 May 2019, the investigation committee submitted a complaint to the police for registering an FIR against four bank officials involved in the loot. However, the Central of Bureau of Investigation (CBI) and Reserve Bank of India (RBI) have not been informed yet.

Similarly, six of the total 25 branches of the Fatehpur District Cooperative Bank Limited were hit by fraud to the tune of Rs 84 crore. This is a huge amount considering the fact that cooperative banks provide subsidies and short-term loans to people in need.

Fraud has also been committed at 10 out of the 42 branches of Bijnor Zilla Sahkari Bank Limited. The bank officials targeted subsidy scheme meant for economically weaker section among Scheduled Castes during 2007-08 when Mayawati was the chief minister. At its Afzalgarh branch, the bank manager had opened 1,301 beneficiary accounts and an intermediary current account in the name of UPS Finance to credit part of the amount received from Scheduled Caste Finance and Development Corporation Ltd. The investigation report suggests that the money credited in 1,301 accounts, which had no KYC documents, was withdrawn within a day.

At the Seohara branch of Bijnor Zilla Sahkari Bank Limited, the bank manager and his eight close aides opened 594 individual accounts to siphon off subsidy amounts. An investigation report said the accounts were credited and debited on the same day. During the investigation, a team of officials found no documentary evidence related to these bank accounts. At the Budhanpur branch of the bank, money meant for the poor was swindled through 749 accounts, which were opened in the name of fictitious beneficiaries with the help of bank staff.

Highlighting the modus operandi adopted in the scam, the investigation report said the bank manager, clerks, and supervisors were directly dealing with the district of Scheduled Caste Finance and Development Corporation Ltd. After receiving the cheques in surreptitiously opened individual accounts, the amount was debited mostly on the same day without maintaining records.

“During branch inspection, inspecting officers from the head office have not examined the issue. They had mainly focused on loans and advances of A/Cs and have not impressed upon branches for reconciliation of various type of deposit accounts. However, the fraud happened through deposit accounts.

"The Head Office (HO) had never prescribed a return regarding subsidy received by branches from various agencies and in turn branches were not informing HO regarding receipt of subsidy during the month/quarter. It was also observed that the involved employees were posted for a more extended period in their choice of a branch without any justification. Internal checks and control system of the bank were very weak. The HO of the bank did not initiate any action to improve the system for almost a decade," investigation report further added.

Fraud has also been detected in the Agra District Co-operative Bank Limited, Allahabad District Co-operative Bank Limited, Banda District Co-operative Bank Limited, Faizabad Zilla Sahkari Bank Limited and Kanpur Zilla Sahkari Bank Limited. Besides, four branches of Uttar Pradesh State Co-operative Bank Limited have also been hit by the large-scale scam.

The situation, it appears, is even worse in Regional Rural Banks (RRB) which were established for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas. Fraud has been detected in all seven RRBs in the state, namely, Allahabad Gramin Bank, Baroda Uttar Pradesh Gramin Bank, Gramin Bank of Aryavart, Kashi Gomti Samyut Gramin Bank, Pratham Bank, Purvanchal Bank and Sarva UP Gramin Bank.

As per the documents reviewed by Firstpost, 275 branches of these RRBs have been hit by the banking fraud. A maximum number of 29 cases of fraud were unearthed in the Gramin Bank of Aryavart followed by 19 cases in Baroda Uttar Pradesh Gramin Bank.

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Updated Date: Jun 26, 2019 13:35:58 IST