Karuvannur Cooperative Bank scam: How a Rs 500 crore fraud shook Kerala

THRISSUR: The massive loan fraud at the Karuvannur Service Cooperative Bank shocked Kerala when it came to light in 2021. The scam was first exposed on July 21, 2021. Following a complaint by the bank secretary, the Cooperation Department filed a complaint, based on which Irinjalakuda Police registered a case. The bank's governing committee, which had been under CPM control for decades, was dissolved. The first case named six accused, including the bank secretary and other CPM leaders. Initially, the irregularities were estimated at around Rs 300 crore.

A high-level committee later found financial irregularities worth Rs 219 crore. Apart from fraudulent loans, irregularities were also detected in chit fund operations and procurement of goods for the bank's supermarket chain.

Many depositors were unable to withdraw their savings and fixed deposits. Three people reportedly died without being able to access their own money for medical treatment, while two others committed suicide.

Although the Cooperation Department and Crime Branch conducted investigations, it was the Enforcement Directorate (ED) that uncovered the full scale of the alleged fraud. According to the ED, the scam involved nearly Rs 500 crore in money laundering and hawala transactions. The agency also found the involvement of several senior leaders. The number of accused in the case later rose to 18, and the properties of several accused persons were attached by investigating agencies.

Massive fraud

• Bank officials and members of the governing committee allegedly misappropriated funds through illegal loans.
• Loans were granted to people outside the bank's operational area and even outside the district.
• Benami transactions were allegedly used to conceal beneficiaries.
• C-Class members were granted loans and business overdraft facilities in violation of norms.
• Although the loan limit for an individual was Rs 50 lakh, loans worth several crores were allegedly sanctioned.
• Defaulters allegedly enrolled others as members and obtained additional loans in their names.
• The same property documents were reportedly used to secure multiple loans. The value of collateral was allegedly inflated to obtain larger loans.
• Middlemen reportedly facilitated the approval of large loans.

Karuvannur Cooperative Bank

• Established: 1921
• Members: 20,000
• Branches: 4
• Neethi Medical Stores: 3
• Cooperative supermarkets: 3
• Fertiliser depot: 1
• Operational Area: Porathissery and Madayikonam villages, and parts of the former Porathissery Panchayat now included in Irinjalakuda Municipality.