Updated at 8.17pm on 20 February 2025 to include statement issued by a legal team representing Ms Zinta...
Updated at 5.25pm on 25 February 2025 to include a Web Archive link of the original article published by IndianCooperative.com
As early as in January 2020, ex-employees of New India Cooperative Bank Ltd had warned the Reserve Bank of India (RBI) about malfunctioning operations and alleged corrupt practices in the Bank. However, RBI failed to take concrete action against the Bank in a timely manner, says
a report from IndianCooperative.com (
web archive link).
According to the report, on 29 January 2020, former employees of New India Cooperative Bank sent a letter to the executive director (ED) of RBI's department of regulations. The letter highlighted severe irregularities, financial mismanagement, corruption and unethical practices within the Bank, under the leadership of chairman Hiren Bhanu.
"Before 2010, the Bank focused on small-ticket loans for priority sectors. After Mr Bhanu's entry, corporate loans of up to Rs25 crore were sanctioned without branch managers' knowledge. Major loans turned into non-performing assets (NPAs) within a year, with funds diverted through other banks," the report says.
Further, it says, "Bollywood actress Preity Zinta's Rs18 crore loan was written off without due recovery procedures. Rajhans group received Rs95 crore in loans, while another Rs210 crore in NPAs was regularly sold to Omkara Assets Reconstruction Pvt Ltd (ARC), raising suspicions of fraudulent loan write-offs. A Rs7 crore loan was granted to ACAIPL, a sister concern of Omkara ARC, allegedly without proper due diligence. Loans were approved for Mr Bhanu's associates using inflated valuation reports. Commission agent Manish Simaria facilitated corporate loans and earned huge commissions despite defaulting on an Rs8 crore loan himself."
The ex-employees also allege in the letter that over 80 senior staff members were forced to resign in 2019. "Family members of senior executives were given privileged promotions, while experienced employees were harassed into resigning. Several relatives of top management were hired and rapidly promoted despite lacking banking experience. Fraudulent activities committed by relatives of senior officials were covered up without any punitive action."
According to the report, these former employees also had "urged RBI to conduct a forensic and special audit of the Bank, dissolve the board of directors and remove chairman Mr Bhanu, recover the bank's losses from the personal assets of directors and management, and prevent the Bank from collapsing like PMC Bank due to similar malpractices."
As reported by Moneylife, this fraud did not materialise overnight, nor was it carried out without signs that should have raised alarms long ago. The Bank's financial reports since 2021 have consistently shown abnormally high cash balances, while its reserves with other banks dwindled to nil. Despite these anomalies, RBI, which conducted annual inspections, did not raise any red flags. This makes a whistle-blower raise a troubling question: Was this negligence, incompetence, or a deliberate cover-up?
New India Cooperative Bank has been grappling with losses in the past two fiscal years. During FY23-24 and FY22-23, the Bank had posted a net loss of Rs23 crore and Rs31 crore, respectively. According to a report from Reuters, New India Cooperative Bank's advances reduced to Rs1,175 crore as of 31 March 2024 from Rs1,330 crore a year earlier. Its deposits increased marginally to Rs2,436 crore from Rs2,406 crore.
New India Cooperative Bank's 2023 audited financials reported Rs122 crore in cash on hand which increased to Rs135 crore in 2024. However, RBI's latest action suggests that the entire sum was missing, leading to speculation that the bank may have had no cash in its own vaults at all.
Last week, citing supervisory concerns and the lender's liquidity position, RBI imposed operational restrictions on the Mumbai-based multi-state scheduled bank. RBI also superseded the board of directors of New India Cooperative Bank for the next 12 months. It also appointed Shreekant, former chief general manager (CGM) of the State Bank of India (SBI) as administrator to manage the affairs of the bank during this period. Further, to assist the administrator, RBI appointed a committee of advisers which includes Ravindra Sapra (former GM of SBI) and Abhijeet Deshmukh (chartered accountant-CA) as members.
Under these restrictions, New India Cooperative Bank is prohibited from granting or renewing loans, making investments, incurring liabilities (including borrowing or accepting deposits), or disbursing any payments without prior written approval from RBI. However, due to these restrictions, several customers and depositors rushed to withdraw money but were left helpless.
UPDATE:
In a statement, a legal team representing Ms Zinta says, "More than 12 years ago, I (Ms Zinta) had an overdraft facility with the New India Co-operative Bank. More than 10 years ago, I (Ms Zinta) have repaid in full the entire dues in respect of this overdraft facility and the account stands closed."
UPDATE 2
1) We have updated the link to the Indiancooperatives.com article by inserting a web archive link since the original article appears to have been removed, as we discovered on 25 February 2025.
2) This article, based on Indian Cooperatives, which was considered a reliable voice for cooperatives, was written on Thursday, 20 February 2025, with due credit.
3) That evening, Suman Das Sarma, vice president of Avian WE, messaged us to say that Ms Preity Zinta's lawyers had drafted a denial on her behalf. He shared with us a three-line text (reproduced below) which had neither the lawyer nor the law firm's name. On phone calls, he told us that the statement is issued by the legal team of his client and urged us to update our article. In good faith, we updated the article at 8.17pm the same day to include the statement from Ms Zinta. We thought the matter had ended there.
4) Five days later, we find ourselves, especially our managing editor, the subject of a malicious and motivated digital campaign - hence these updates.
5) We now have in our possession a copy of the letter dated 29 January 2020 written by former employees of New India Cooperative Bank addressed to the ED of the department of regulations at the RBI and signed by 27 employees.
How can RBI be so negligent? Why are such banks allowed to keep expanding?
The government must ensure that everybody gets their entire money back.
1. Was RBI negligent in not following up on these blatant wrongdoing?
2. The RBI bank employee(s) who decided to ignore these explicit warnings in cahoots with Mr Bhanu?
3. Did the RBI employee have assets exceeding her/his financial standing after the warnings were ignored?
4. Does this bank employee have a sugar daddy, higher up in the RBI bank hierarchy, who protected this employee's malfeasance?
If RBI wants the people to trust its reputation, then these blatant crimes must be investigated and made public immediately. Otherwise the original crime will be exceeded by the coverup, as usually happens in such financial/political criminal cases.