In a shocking revelation, New India Co-operative Bank has been caught in a ₹122 crore fraud, just days after the Reserve Bank of India (RBI) imposed withdrawal restrictions. The fraud has raised concerns about the security of cooperative banks in India and the effectiveness of financial regulations. It also underscores the vulnerabilities in India’s banking sector, particularly among cooperative banks that often operate with looser regulations compared to their commercial counterparts.
This Bank Now Caught in a ₹122 Crore Fraud:
| Aspect | Details |
|---|---|
| Bank Involved | New India Co-operative Bank |
| Fraud Amount | ₹122 Crore |
| RBI Action | Board superseded, Administrator appointed |
| Main Accused | Hitesh Mehta (GM, Accounts Head) |
| Crime Period | Since COVID-19 pandemic |
| Affected Depositors | Withdrawing restricted, insured up to ₹5 lakh |
| Official Website | rbi.org.in |
The ₹122 crore fraud at New India Co-operative Bank is a wake-up call for depositors and regulators. It shows how even senior officials can exploit loopholes in banking systems. RBI’s action aims to protect depositors, but the bigger lesson is to stay vigilant and choose financial institutions wisely.
What Happened? The Fraud Breakdown
The fraud at New India Co-operative Bank was uncovered when an RBI audit on February 12, 2025, detected missing funds amounting to ₹122 crore from two branches:
- ₹112 crore missing from Prabhadevi branch
- ₹10 crore missing from Goregaon branch
Upon investigation, the Economic Offences Wing (EOW) of Mumbai Police arrested Hitesh Mehta, the bank’s General Manager and Head of Accounts, for allegedly siphoning off funds over several years. Mehta reportedly confessed that he had been withdrawing cash from the bank’s reserves since the COVID-19 pandemic began.
The scheme involved misreporting the bank’s cash reserves, enabling continuous siphoning of funds without immediate detection. Despite being a high-ranking official, Mehta was able to manipulate financial records and bypass regulatory scrutiny, revealing gaps in existing oversight mechanisms.
RBI’s Response: Restrictions & Oversight
Following the fraud discovery, the RBI took strict action, including:
- Suspending the bank’s board for 12 months.
- Appointing an administrator, Shreekant, a former Chief General Manager of SBI.
- Restricting all cash withdrawals to prevent further financial instability.
- Barring new loans, advances, and fresh deposits.
- Directing a forensic audit to investigate internal processes and pinpoint regulatory failures.
What Does This Mean for Depositors?
- Depositors cannot withdraw money due to the restrictions.
- Savings up to ₹5 lakh are insured under Deposit Insurance and Credit Guarantee Corporation (DICGC) and should be refunded within 90 days.
- Customers must wait for RBI’s further decision on reopening or merging the bank.
- In some previous cases, banks under restrictions were either merged with stronger banks or completely liquidated.
How Did This Fraud Go Undetected?
Despite RBI’s regulatory framework, this fraud went undetected for years. Here’s how it happened:
- Weak Internal Audits – The bank’s own monitoring systems failed to detect discrepancies.
- Manual Handling of Cash – Unlike digital transactions, cash handling left no immediate audit trail.
- Trust in Senior Officials – Employees were less likely to suspect a high-ranking official like Hitesh Mehta.
- Delayed External Audits – Annual audits did not uncover the systematic cash withdrawals.
- Regulatory Lapses – Despite RBI inspections, the fraud persisted, indicating possible gaps in oversight.
Lessons for Depositors: How to Protect Your Money
This incident highlights why depositors must be cautious when choosing where to keep their money. Here’s how you can safeguard your savings:
1. Choose Banks Regulated by RBI
Always verify if a bank is registered with RBI. You can check on the official RBI website.
2. Diversify Your Deposits
- Keep your savings in multiple banks.
- Use different account types (savings, FDs, mutual funds) to spread risk.
3. Check Deposit Insurance Coverage
Ensure your bank deposits do not exceed ₹5 lakh per account, as this is the maximum insured limit under DICGC.
4. Monitor Your Bank Statements
- Regularly check for unauthorized transactions.
- Report suspicious activity immediately to the bank.
5. Stay Updated on RBI Alerts
- Subscribe to RBI alerts for updates on cooperative banks.
- Follow financial news to stay informed about bank health and regulatory actions.
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Frequently Asked Questions (FAQs)
1. What happens if a bank is caught in fraud?
When a bank is caught in fraud, RBI takes action like suspending operations, restricting withdrawals, and sometimes initiating a merger or liquidation to recover funds.
2. Will depositors get their money back?
Yes, but only up to ₹5 lakh per depositor under DICGC insurance. Anything above this limit depends on RBI’s decision and bank recovery measures.
3. Can I withdraw my money now?
No, RBI has frozen withdrawals until further notice. Depositors must wait for updates from RBI or the appointed administrator.
4. How do I check if my bank is safe?
Visit RBI’s website and check if the bank is under restrictions or has poor financial health.
5. Are cooperative banks riskier than commercial banks?
Yes. Cooperative banks have weaker regulations, making them more vulnerable to fraud and mismanagement. It’s safer to keep savings in well-established commercial banks.
