New India Co-operative Bank scam: Could RBI have stopped the Rs 122-crore fraud?

Hitesh Mehta, former GM of the New India Co-operative Bank in Esplanade court on February 16. Pic/Ashish Raje

As the investigation into the New India Co-operative Bank scam intensifies, more details have emerged. The Reserve Bank of India (RBI) was aware of the irregularities at the bank since May 2021, yet it failed to prevent the misappropriation of Rs 122 crore, which mysteriously vanished from the bank's cash vault. According to sources in the Economic Offences Wing (EOW), this revelation came to light following the statement of the complainant - the acting chief accounting officer of the bank.

EOW sources revealed that the RBI had flagged multiple irregularities in the bank's operations. The central bank found that the bank's Capital Adequacy Ratio (CAR) or Capital to Risk Assets Ratio (CRAR) was alarmingly low. It also observed risky loans and credit disbursements exceeding limits. "Other red flags included a surge in cash holdings, rising non-performing assets (NPAs), negative net worth, and cases of conflict of interest, where loans were granted to bank officials' relatives and associates without disclosure," an EOW officer stated.

Hitesh Mehta, former general manager of the New India Co-operative Bank is produced in the Esplanade court on February 16. Pic/Ashish Raje

Despite issuing multiple advisories, the RBI's warnings were ignored. Sources said the bank's cash holdings, which stood at approximately Rs 30 crore in 2021, surged to Rs 130-Rs 138 crore by 2025. During an RBI-empaneled inspection on February 12, officials discovered that Rs 122 crore was missing from the vault. Following this, bank officials lodged a complaint, and the New India Co-operative Bank scam case was handed over to the EOW. "We will question RBI officials regarding the irregularities they identified, the preventive measures they took, and why the missing cash was never flagged. However, this will happen at a later stage. Our immediate priority is recovering the Rs 122 crore," the officer added.

So far, the EOW has arrested Hitesh Mehta, the bank's former account head, and Dharmesh Paun, a developer to whom Mehta allegedly paid around Rs 70 crore in cash. Another accused, who reportedly received Rs 40 crore, remains at large, and a Lookout Circular (LoC) has been issued against him. Initially, Mehta claimed he had received only Rs 2 crore, but he has now admitted to receiving Rs 12 crore. The cops are considering conducting a lie detector test on the former general manager. The EOW stated that the bank has around two lakh account holders, with branches in Mumbai, Pune, and Surat.