Bank staff, chief arrested for multi-crore loan fraud

TNN | Aug 2, 2014, 06.21AM IST
SHIMOGA/ BANGALORE: Unearthing a multi-crore scam involving disbursal of gold loans by a cooperative bank, Shimoga police on Friday arrested 18 staff members of the Shimoga District Central Cooperative Bank (SDCCB), including its president Manjunath Gowda, for their alleged involvement in irregular practices. 

Gowda and the bank employees were charged with disbursing loans against fake gold, and in some cases, with no gold being mortgaged against the money advanced. According to a preliminary probe, the bank incurred a loss of Rs 68 crore for non-compliance with rules in issuing gold loans, which police feel may cross Rs 100 crore. 

The arrested were booked under sections 420 (cheating), 406 (punishment for criminal breach of trust), 408 (criminal breach of trust) and 409 (criminal breach of trust by a public servant in a bank) of the IPC, and 120B of Misappropriation of Bank Funds. 


The scam broke out early in July, after the bank's general manager Nagabhushan lodged a complaint with Doddapet police on July 15, alleging large-scale financial irregularities in the Amir Ahmed Circle branch in Shimoga city. 

Realizing the proportion of the fraud, Shimoga SP Koushalendra Kumar ordered a probe, and police seized several documents, including papers relating to illegal investment in various properties, gold-coated silver worth Rs 10 crore and cash. 

The issue figured in the legislative council on July 26, and cooperation minister HS Mahadev Prasad ordered a CID inquiry into the gold loan fraud across 28 branches of the SDCCB. 

When the fraud was first unearthed, it was found that only three bank staffers and the manager had sanctioned gold loans against deposits of fake gold, and in some cases, without any gold. A detailed investigation resulted in police arresting 18 persons, including Gowda, his driver, general manager and complainant Nagabhushan, seven staffers of the Gandhi Bazaar branch, five gold appraisers and two members of a rowdy group involved in underworld activities. 

A report on the arrests made and investigation so far was sent to the state government and Reserve Bank of India, the SP said. 

Don't worry, depositors told 

As news about the arrests spread, depositors started thronging the bank's branches to withdraw their deposits and pledged gold. These were small depositors who had pledged pure gold to avail of loans from the bank. 

Seethamma of KR Pet, a vendor, had availed of Rs 50,000 by depositing her valuables. She has been visiting the bank every day since the fraud came to light, and has even borrowed money to withdraw her pledged gold. 

According to officials of the Karnataka State Cooperative Apex Bank, there is no need for depositors to panic as the SDCCB is a subsidiary and comes under the purview of RBI guidelines. The bank has total deposits to the tune of Rs 1,000 crore, with a turnover of Rs 1,800 crore. 

A senior police officer said all deposits would be returned to the investors with full maturity value, and the money defrauded will be recovered from the accused after investigation is complete. 

Rajya Sabha MP Ayanur Manjunath has written to Nabard, seeking supercession of the bank and inspection of its records by Nabard. 

Who is Manjunath Gowda? 

Manjunath Gowda, 56, was once a close associate of former chief minister BS Yeddyurappa. He was appointed vice-president of the Karnataka Janata Paksha (KJP), which the former CM founded after he fell out with the BJP.

Gowda contested from Thirthahalli assembly constituency in Shimoga district on a KJP ticket in the 2013 assembly elections, and lost by a narrow margin of 120 votes to primary and secondary education minister Kimmanne Ratnakar. When Yeddyurappa returned to the BJP, Gowda did not follow him.