(This is part three of the series uncovering the Karuvannur Co-operative bank fraud. For parts one and two, click here and here.)
Thrissur: Many of the people who have been served with recovery notices by the Karuvannur Cooperative Bank are yet to make a formal complaint. When this correspondent caught up with a person who was slapped with a Rs 50 lakh recovery notice, he confirmed that he received the notice even though he had borrowed only Rs 10 lakh.
He, however, has not bothered to lodge a complaint with the police or the cooperation department. He had pointed out the anomaly to the cooperation department registrar and the CPM members who visited his house to enquire about the problem. He had not even bothered to take a copy of the notice before handing it back to the bank employees who assured him that everything will be set right.
Strangely enough, many of the people are not even complaining about a disturbing situation in which they are asked to repay a loan they had not even taken. They are intimidated by the powerful people who helm the bank. Most of the members of the cooperative society are CPM members and they stay loyal to their leaders even when they cross the line.
The party leaders were forced to withdraw the recovery notices after receiving bad press. They went from house to house to collect all the notices and remove them from public glare.
A delegation from the party’s local unit visited the houses of people who were left in the lurch after depositing money in the bank and those who received recovery notices on loans they had not taken. The delegation was supposedly sent to keep the morale of the customers intact. They told the cooperative society members that the bank was nowhere near a crisis and they could tide over the problem with a loan of Rs 30 crore from the Kerala Bank.
They said that the plan was to repay the depositors in the first phase. Then they would address the problems of those who received recovery notices by “mistake”. There was a catch though: the cooperative society members had to cooperate with the bank administration. In other words: Do not create a ruckus if you want your money back.
The message had had its effect. Almost everyone has chosen to stay silent, even though the scam runs into Rs 300 crore as per the audit of the Cooperation Department.
Intimidation tactics alone don’t explain the silence on the part of the depositors. Many of them were lured into the scam with promises of easy money. A daily-wage labourer who lives in Irinjalakuda narrated how he was dragged into the scam. “About four years ago, commission agent Bijoy visited me. He promised to pay me Rs 50,000 if I just submitted an application for a loan. He said I did not have to present any collateral and I did not even have to repay the loan. Now, the bank says I have a liability of Rs 50 lakh.”
The scamsters got the labourer to apply for a bigger loan in return for a smaller amount. They presented as collateral the land belonging to someone else. Ultimately, the labourer is left with a liability of Rs 50 lakh.
Murali from Mapranam deposited Rs 19 lakh in the Karuvannur Cooperative Bank after he retired. That was his life’s savings, including his retirement benefits. He wanted the money to get his daughter married and to give his sisters their share in the ancestral property. He is worried about his savings as news of the scam pours out.
Murali started his career as a parallel college teacher. He retired as a senior assistant from Travancore-Kochi Chemicals. He had deposited what money he received from a savings scheme and the payment from a land deal in his late brother’s name.
The scam accused used indigenous techniques to embezzle money from the bank. They tampered with the bank’s software to approve loans without any collateral documents. The interest rates of fixed deposits were tampered with. They removed details of all irregular transactions from the system. Backup data was messed up beyond repair.
They had even done away with the facility that allowed account holders to change passwords.
The accused abused the software code of an employee who was authorised to approve of the loans. A person who had borrowed a huge amount from the bank was given a cash receipt to prove that he had repaid the full amount even without repaying a single rupee.
The bank relied on V Bank software to conduct online transactions. The software records the transactions done by anyone who logs in with admin credentials. The system was found to be heavily tampered with. Details of log-in and log-out were deleted with help from experts to destroy all evidence of fraud.
A typical scene from the scamsters’ playbook unravels like this.
The bank manager receives an application from a bona fide account holder for Rs 10 lakh. The manager vets the application and the documents of collateral and eventually rejects the application citing technical reasons – but not before noting down the name and address of the applicant.
The manager hands over the personal details of the rejected applicant to a commission agent. The agent goes to the person’s house and offers to get the loan approved in return for a commission of 10 per cent. The applicant agrees.
The commission agent takes the applicant to the manager again. He introduces the applicant as an important person. The manager receives a fresh application. This time, he finds all the paperwork to be in order. The applicant is granted the loan. He goes home with Rs 9 lakh, has given the commission agent his cut.
That is not the end of the scam. The real game starts after the borrower leaves the bank. The manager would have passed a loan of Rs 50 lakh on the mortgage without the knowledge of the applicant. The rest of the money – Rs 40 lakh – is split between the manager and the agent.
Bank secretary T R Sunil Kumar has put the bank’s administrative committee in the dock for the loan scam. A note written by Sunil Kumar to the department’s assistant registrar, seen by Onmanorama, makes it clear that the CPM-controlled administrative committee had a major role to play.
The secretary laid the entire responsibility for granting loans without sticking to norms at the door of the administrative committee. All requests for loans have to be approved by the administrative committee and signed by the president before they are passed on to the section concerned. No loans are approved without the knowledge of the committee, he wrote.
The administrative committee colluded with erring officers of the bank rather than exposing them, he added.
The officers can only make recommendations on whether to approve a loan or not. The administrative committee is in full command of whether to approve it or not. The secretary is just an executive officer in charge of implementing the decision of the committee. The committee has vetted all loan applications, according to the documents.
The minutes of the administrative committee meetings are not written later. Those minutes are read out in the same meeting and signed by the president. Never was a complaint that the minutes were added later.
We have found incidents when the borrowers sold off the collateral they had mortgaged with the bank. They could not claim their mortgaged title deeds without the connivance of the administrative committee.
The bank has granted loans even to those people in areas outside its limits. These loans were approved as per the directions of the administrative committee. This is illegal, Sunil Kumar’s note read.
(To be continued…)