Stumped EOW officials struggling to piece together how Hitesh Mehta siphoned off money and re-lent it off-books to developers
(Left) Hitesh Mehta, former GM of the New India Co-operative Bank, in court. Pic/Ashish Raje
The Economic Offences Wing (EOW) of the Mumbai police is struggling to figure out how accused Hitesh Mehta siphoned depositor money from New India Co-operative Bank and re-lent it to developers off the books. Investigators say Mehta withdrew large sums from the bank vault, allegedly funding SRA developer Dharmesh Paun and another absconding accused linked to the solar business, all while charging interest.
Mehta claims he lent Rs 70 crore to Paun and Rs 40 crore to the solar businessman, but Paun, in his statement to the EOW, insists he received only Rs 2 crore, which he later returned. With no digital or official records of these cash transactions, officials suspect deeper involvement from within the bank—and possibly even the RBI—questioning how the New India Co-operative Bank scam went undetected for years despite regular audits.
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Customers rush to the New India Co-op Bank in Andheri after strict withdrawal curbs last Friday. Pic/Nimesh Dave
“So far, what we know is that the bank has conducted internal audits every year, and according to the accused, he has been diverting funds since COVID-19. The big question is: why did internal audits never flag the missing cash? Additionally, banks are expected to conduct concurrent audits for significant transactions, though this depends on their policies. RBI-empanelled auditors also conduct annual audits, yet the New India Co-operative Bank scam was only detected in February this year. Why did the RBI panel fail to notice this earlier, considering the same panel is eligible to audit for at least three years?” an EOW officer questioned.
Investigators have found that Mehta allegedly withdrew cash from the bank vault and lent it out while charging interest. However, there are no official records of these transactions since they were all conducted in cash. “This is the first time in a bank scam where transactions were entirely in cash, making it difficult to establish the financial trail. However, we are hopeful of retrieving digital evidence, as phone data has been sent for forensic analysis. We expect to uncover details of transactions between the accused and other wanted individuals,” the officer added.
(Left) Hitesh Mehta, former general manager of the New India Co-operative Bank is produced in the Esplanade court on February 16. Pic/Ashish Raje
The probe also revealed that Paun has SRA projects in Charkop, Kandivli, under Dharmesh LLP, a company established in December 2016. The Charkop project, valued at around Rs 300 crore, is being built on collector land. Due to certain conditions, Paun was unable to secure a bank loan and allegedly turned to Mehta for financial assistance. Investigators have asked Paun to produce documents proving whether he secured a loan for the project, but he has yet to submit any records, an officer said.
The EOW is now set to summon the bank’s auditors and RBI’s audit panel for questioning. Another key concern is whether the New India Co-operative Bank scam is limited to R122 crore, as stated in the FIR. The RBI has imposed restrictions on the bank, but its annual report shows total depositor funds exceeding R2000 crore, raising further doubts about the full scale of the fraud.
Govt considering raising deposit insurance limit above current Rs 5 lakh: Official
The government is “actively considering” raising the deposit insurance limit beyond the current Rs 5 lakh, a top finance ministry official said on Monday. Days after the New India Co-operative Bank scam came to light, Department of Financial Services Secretary M Nagaraju announced that such a proposal is in works.
“The point about increasing insurance... that is under active consideration. As and when the government approves, we will notify it,” he told reporters at a press conference in the presence of Finance Minister Nirmala Sitharaman.
He, however, declined to speak on the crisis at New India Co-operative Bank, saying the RBI is seized of the matter. A deposit insurance claim gets triggered when a lender goes down, and over the years, the Deposit Insurance and Credit Guarantee Corporation (DICGC) has paid out such claims. The body collects premiums from banks for the cover it offers, and a majority of the claims have had to be done in the case of cooperative lenders.
It can be noted that following the PMC Bank scam, the DICGC insured limit was raised to R5 lakh from R1 lakh in 2020. Economic Affairs Secretary Ajay Seth said the cooperative banking sector is well regulated under the RBI’s watch and termed the overall health of the sector as strong.
A crisis at one entity should not lead anybody to cast doubts on the overall sector, he added, pointing out that it is the job of the regulator to take actions against errant entities. As per reports, 90 per cent of New India Co-Operative Bank’s 1.3 lakh depositors will have their entire sums covered under the DICGC.
Rs 2000CR
Approx. value of total depositor funds
Rs 70CR
Amount Mehta claims he lent Paun
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