Karnataka govt goes after Indian Overseas Bank to recover KRIDL money

Karnataka is on a collision course with the Chennai-based Indian Overseas Bank after the public sector lender declined the government’s request to return money that was siphoned off in a scam three years ago.

In 2017, the government lost Rs 55 crore from the Kulai branch of IOB in Mangaluru. The money belonged to the state-run Karnataka Rural Infrastructure Development Ltd (KRIDL) in whose name a fake account was created to pilfer the money.

According to documents accessed by DH, Chief Secretary T M Vijay Bhaskar shot off a letter in June to IOB managing director and CEO Karnam Shekar seeking the return of the pilfered money with interest. "If the IOB fails to return the money in this matter, then we will be constrained to withdraw all deposits made by the government organisations and departments and further action will be taken to close all such accounts," Bhaskar stated, adding that Syndicate Bank returned Rs 100 crore that was pilfered in a similar case.

IOB executive director Ajay Kumar Srivastava wrote back to say the bank was not in a position to accede to the government’s demand. "Since fraud could not have taken place without initiation of the same by the employees of KRIDL, we are disputing our liability in the matter," he stated, adding that the case was sub-judice. Srivasatava also said the bank had already appraised "full facts of the matter" to the Finance ministry.

The scam was unearthed in October 2017 when the Vijaya Bank informed KRIDL that a dormant account got credited with Rs 50 lakh from its own account in the Kulai IOB branch. The CID was asked to probe this and a charge-sheet has been filed.

"I am shocked to find that despite serious irregularities and fraud committed by the branch manager and other staff of the IOB, the senior management has taken no action to cooperate with the government...," Bhaskar stated in his letter. The IOB said it was "extending all possible support to the state police."

So far, authorities have managed to recover Rs 3.47 crore from those involved in the scam.

"We have records to prove that the bank has been obstructive. We're discussing with the Finance department on issuing a show-cause notice to the IOB," a senior government official said. When the IOB’s media wing was contacted, DH could not elicit a comment.