JOIN USCCB raids scam-ridden Shushruti Bank in Bengaluru, arrests chairman
The Central Crime Branch (CCB) on Wednesday raided 14 places linked to the Bengaluru-based Shushruti Souharda Sahakara Bank Niyamita as part of a probe into a multi-crore financial fraud, a senior police officer said.
Five people, including the bank's founder-chairman N Srinivasa Murthy, have been arrested. Two women are among those arrested.
Fourteen teams of the CCB's economic offences wing launched simultaneous search operations at the residences and houses of Murthy and 11 of his relatives and associates. The raids commenced in the morning and are still ongoing at some places, S D Sharanappa, Deputy Commissioner of Police (Crime 1), who spearheaded the operation, told DH.
Gold and silver articles, cash, property papers and documents related to loan transactions at the bank have been seized, Sharanappa said. He added that the value of the seized assets is being evaluated.
The co-op bank was founded in 1998 and has its head office on Andrahalli Main Road in Peenya, North Bengaluru. It has a banking licence from the Reserve Bank of India (RBI) and is also registered under the Karnataka Souharda Sahakari Act, 1997. It has branches at Wilson Garden, Sanjayanagar, Chikkalasandra and Chikkaballapur.
The bank offered customers attractive returns of up to 9 per cent on investments. The Shushruti Jantha Nidhi scheme, for example, promised 9 per cent returns if Rs 4 lakh was invested for 12 months. A 13-month fixed deposit fetched an 8 per cent return, far higher than that offered by mainstream banks.
According to the CCB, Murthy extended large loans to his relatives and associates without carrying out due diligence. These borrowers defaulted on repayments. "The bank extended loans without adequate sureties," Sharanappa said.
The reckless lending, coupled with loan defaults, squeezed the bank, which began to delay interest payments to depositors and investors. In April this year, the RBI capped cash withdrawals at Rs 5,000 and restricted the bank from granting or renewing loans and advances and taking deposits without its approval.
The CCB is still in the process of evaluating the magnitude of the scam. A clearer picture will emerge soon, the officer said.
Three police cases were registered over the scam. Considering the gravity of the scam, the case was transferred to the CCB.
In September, Cooperation Minister S T Somashekar told the Karnataka Legislative Council that out of the Rs 180.77-crore deposits in Shushruti Souharda Sahakara Bank Niyamita, Rs 110 crore was found to have been misappropriated.
Shushruti Souharda Sahakara Bank Niyamita joins a list of Bengaluru-based co-op banks that have gone bust in recent years. Sri Guru Raghavendra Sahakara Bank Niyamitha, Sri Vashista Credit Souharda Sahakari Ltd and Sirivaibhava Souharda Pathina Sahakari Niyamitha are among credit co-ops that run into financial troubles.