February 7, 2025

Sindhu A.V., a nursing assistant hailing from Manithara village in Avanoor panchayat of Kerala, found herself in a financial bind when she borrowed ₹18 lakh in 2014 from the Mundur branch of the Thrissur District Cooperative Bank. The loan was aimed at funding a guesthouse for medical students right next to Thrissur Government Medical College Hospital, backed by her family’s 32-cent land and house.

Unfortunately, her life took a drastic turn when an accident kept her out of work for two years, disrupting her construction project. Unable to keep up with the loan repayment of around ₹29,000 per month, she defaulted, and her debts quickly piled up. Furthermore, the demonetization also added to her financial struggles.

In 2017, Sindhu was introduced to P. Satheesh Kumar, a private financier, by her husband’s friend. Satheesh offered to repay her existing loan and arrange a new one to help her out. Initially, she found it a good idea to escape the growing interest of her current loan.

However, it didn’t exactly go as planned. Satheesh claims to have addressed her loan issue at the Mundur branch with a ₹25.5 lakh payment within a fortnight. But Sindhu later found that he only had to pay ₹19.5 lakh. What’s worse, he charged a whopping 10% monthly interest.

Just a month later, Satheesh arranged another loan for Sindhu at the Thrissur District Cooperative Bank’s Medical College branch at Peringandoor. She was taken aback when the loan reached up to ₹35 lakh, an amount she had no means of repaying.

The trouble didn’t stop there. Satheesh snatched the money right from Sindhu’s hand when she was discussing her concerns with the bank staff. He promised to find a buyer for her property if she couldn’t repay.

Unmasking the Mastermind

In September 2023, the Enforcement Directorate (ED) arrested Satheesh Kumar, revealing him as the main perpetrator behind a significant loan fraud case that shook the entire cooperative sector in Kerala. It is alleged that Satheesh embezzled illegal loans worth ₹14 crore from the Karuvannur Service Cooperative Bank. This was the ED’s first arrest under the Prevention of Money Laundering Act, 2002.

Sindhu filed a complaint with the ED against the cooperative bank’s Medical College branch at Peringadoor, accusing them of colluding with Satheesh to rob her ₹35 lakh. She had previously lodged a complaint against Satheesh with the Medical College police.

The authorities also arrested P.P. Kiran, a real estate player alleged of receiving 51 loans worth ₹24.56 crore illegally by remortgaging properties without the owner’s knowledge. According to the ED, around 90 loan borrowers have to repay the bank approximately ₹343 crore in illegal loans.

Unraveling the Karuvannur Fraud

Established as an agricultural society in 1921, Karuvannur Service Cooperative Bank had a long-standing leadership under the Communist Party of India (Marxist). The scam severely impacted its reputation and depositor base.

Internal audit reports unveiled a fraudulent amount of ₹300 crore, showing manipulation of deposit interest rates, forgery of documents, and tampering with the bank’s software to approve loans without any collateral. Even benami transactions and remortgaging without the rightful owner’s consent were rampant.

The investigation under Prevention of Money Laundering Act, commenced by the ED, discovered ₹200 crore worth of benami properties and highlighted the bank’s gross mismanagement.

The Scandal’s Consequences

The large-scale fraud at Karuvannur Service Cooperative Bank has considerably damaged the credibility of Kerala’s cooperative sector. Being fundamental to the financial stability of several people, the repercussions of this fraud will definitely cast a long shadow on the cooperative sector’s future.

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Frequently Asked Questions (FAQs)

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Who is the primary accused in the Karuvannur Service Co-operative Bank scam?

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P. Satheesh Kumar is the main accused in the Karuvannur Service Co-operative Bank scam. He was arrested by the Enforcement Directorate on charges of embezzling illegal loans amounting to ₹14 crore from the bank.

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What methods were used in the scam at the Karuvannur Co-operative Bank?

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Various fraud tactics were employed including manipulation of deposit interest rates, approval of loans without proper collateral, forging of documents and signatures, tampering with the bank’s software and conducting benami transactions. The bank’s assets were also illegally remortgaged without the knowledge or consent of the original owners.

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What was the impact of the Karuvannur Service Co-operative Bank scam on the cooperative sector in Kerala?

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The scam significantly marred the credibility of the cooperative sector in Kerala. The case not only affected the financial stability of many individuals but also dented the popular trust in cooperative banks in the region. The incident is a glaring example of how a major scam can wreak havoc on people’s livelihoods and the entire cooperative sector’s reputation.State’s cooperative sector, plagued with frauds and scandals, currently faces a substantial crisis of confidence. This doubting atmosphere has led to a shift of customers towards other banking alternatives. The strict limitations on cash withdrawal have left depositors feeling swindled.

A key example of this is Sasi Kolangad, 53, of Theleppally, who was one of many victims of such scams. Despite having a deposit of ₹14 lakh in Karuvannur Service Cooperative Bank, his sister Mini Raju was only able to withdraw ₹50,000 to cover his hospital fees when he suffered a brain haemorrhage. Following multiple requests and providing hospital bills as proof, the bank finally dispersed a total of ₹1.90 lakh in several installments. After Kolangad’s unfortunate demise on September 30, the bank appeared to be short on funds due to the scams.

Philomina, 70, also suffered a similar fate. Despite having saved ₹30 lakh in the Karuvannur bank, they denied funds for her treatment. She passed away on July 28, 2022, leaving her husband Devassy with the belief that she would have survived had the bank released their funds timely.

Amidst the financial crises caused by the Karuvannur scam, the Enforcement Directorate (ED) appears to be cornering the Communist Party of India Marx (CPI(M)), leading most of the cooperative societies’ governing bodies. The claim that prominent CPI(M) leaders directed illegal loans has placed the party in hot water.

Moreover, members of the former governing body of the Karuvannur bank claim to be scapegoats. For instance, former board member V.K. Sugathan, who was arrested and imprisoned for 77 days, insists loan decisions above ₹5 lakh were made without his knowledge.

The CPI(M), on the other hand, claims the situation is manipulated by the Centre to wreck the credibility of the state’s cooperative sector. On this note, Chief Minister Pinarayi Vijayan has vowed to safeguard the depositors’ money. He accuses the ED of exaggerating the Karuvannur scam and eroding the cooperative sector’s reputation.

Despite announcing a relief package of ₹50 crore for Karuvannur, the state government, led by CPI(M), suspects the Centre’s intentions to introduce multi-state cooperatives. Allegations of a lack of proper auditing mechanism and transparency in the cooperatives’ functioning, controlled by local politicians, have been deemed major causes of the crisis. Even CPI(M) leaders have criticized the government and party for their handling of the scam. Consequently, the cooperative sector is struggling to win back public trust.

FAQ:

1. **What were the implications of the Karuvannur scam?**
The scam had significant consequences. Besides financial losses for the banks and depositors, it has severely affected the trust consumers had in the State’s cooperative sector. Many are now shifting their loyalties to other financial institutions.

2. **What charges are being leveled against the Communist Party of India Marx (CPI(M))?**
CPI(M) leaders allegedly directed the sanction of illegal loans, which has led to their involvement being scrutinized. Former governing body members of the Karuvannur bank have claimed to be scapegoats in this scenario as they allege decisions were made without their knowledge.

3. **What steps has the government taken in the aftermath of the scam?**
The government has announced a relief package of ₹50 crore for Karuvannur. The Chief Minister has also pledged to protect every penny of the depositors. However, these moves have yet to reconcile the public’s trust in the cooperative sector.