New India Co-Operative Bank scam: Not happy with RBI’s responses about audit, says EOW

Former New India Co-operative Bank GM Hitesh Mehta and accused Dharmesh Paun, produced before the Killa court on February 16. File pic

The Economic Offences Wing (EOW) of the Mumbai Police, investigating the Rs 122 crore embezzlement case related to the New India Cooperative Bank scam, has recorded statements from the RBI inspection team that conducted an audit on February 12. The EOW has requested RBI for notes detailing the reasons behind the February raids, which the RBI has yet to provide.

Sources revealed that the EOW is dissatisfied with the responses received - particularly regarding rising non performing assets (NPA) and increasing cash on hand - given that no prior inspections were conducted earlier. Additionally, RBI officials are under scrutiny, and a senior EOW officer of DCP rank is expected to meet with senior RBI officials to understand the inspection process and why these issues went unnoticed for two to three years, despite the bank being under RBI supervision since 2021.

Harish Mehta former GM of of the bank at the EOW office on Feb 15. Pic/Satej Shinde

The RBI inspection team, which carried out the audit on February 12, included the deputy general manager and other officers of the RBI. They arrived at the bank's corporate office in Prabhadevi for a routine inspection, during which they discovered significant cash discrepancies amounting to R122 crore. The EOW has recorded their statements as part of the ongoing investigation.

Additionally, the EOW has invoked the newly added Section 107 of the Bharatiya Bharatiya Nagarik Suraksha Sanhita (BNSS) against the accused to seize their property as proceeds of crime. Section 107 of the BNSS empowers authorities to attach and confiscate assets derived from criminal activities. This section was introduced in Bharatiya Bharatiya Nagarik Suraksha Sanhita (BNSS) for cases where special acts, such as the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (MPID Act), cannot be applied. According to the EOW, this is the first time Section 107 of the BNSS has been invoked in Maharashtra since the law came into existence.

ATM in Andheri on Feb 15 after RBI enforced a 6-month ban. Pic/Ashish Raje

"We have been utilising whatever legal remedies available before us to ensure that the Rs 122 crore amount is recovered," said Nishith Mishra, joint commissioner, EOW. He further stated that after considering all aspects of the case, an application was submitted to the appropriate court, which was convinced and granted permission for the investigating officer to invoke Section 107 of the BNSS. Following this, around 21 immovable properties belonging to the five accused, including Hiren Bhanu, have been attached under the new law.

"The properties were purchased between 2019 and 2024, during which the Rs 122 crore embezzlement took place. Therefore, they have been treated as proceeds of crime," Mishra added. The EOW has so far arrested seven people accused in the case, and the former vice chairman Hiren Bhanu and his wife, the acting chairman Gauri Bhanu, have been named as wanted accused. Hiren recently wrote a letter to EOW and shifted the blame on General Manager Hitesh Mehta, the prime accused in the case, alleging that he had done everything without his knowledge.

Former chairman Hiren Bhanu of the New India Co-operative Bank and his wife, Gauri Bhanu, the acting chairperson and vice-chairperson of the bank

Bhanu's complaint also contains a declaration affidavit by Mehta taking all the blame, but in EOW's custody, Mehta has retracted the statement and claims that around Rs 26 crore had gone to the Bhanu couple. According to Bhanu's letter, the bank has been under RBI supervision since May 24, 2021, as part of the RBI Supervisory Action Framework. An RBI representative has been present on the Board since then, initially Anish Kumar and later Ashish Gupta.

The bank's internal audit processes were overseen by CA Prakash Vernekar, deputy general manager of the inspection and Audit Department, whose reports consistently recorded "no adverse remarks" and did not identify any discrepancies. Additionally, RBI supervisors regularly accessed the Core Banking System (CBS) of the bank to review various reports. Despite these consistent checks, no issues related to cash holdings were flagged by supervisors Ravindran and Rajat.

Over the past three years, both officers frequently communicated with Hitesh Mehta and Abhimanyu Bhoan (the former CEO and accused in the case), often late at night, requesting information for the following morning.