In a significant development, Mumbai’s Economic Offences Wing (EOW) has arrested Dharmesh Paun, a Kandivali-based real estate developer, in connection with the Rs.122 crore fraud at New India Cooperative Bank. Paun allegedly received Rs.70 crore from Hitesh Mehta, the bank’s General Manager and Head of Accounts, who was arrested earlier for siphoning off funds.
Uncovering the Fraud
The scam came to light during an audit by the Reserve Bank of India (RBI) at the bank’s headquarters in Prabhadevi and its Goregaon branch. Auditors discovered discrepancies of ₹112 crore at the Prabhadevi office and Rs.10 crore at the Goregaon branch. Upon questioning, Mehta, a long-serving employee due to retire next year, confessed to embezzling funds since the COVID-19 pandemic. He admitted to diverting the stolen money to individuals he knew for investment purposes.
Arrests and Legal Proceedings
Following Mehta’s confession, the EOW arrested him on Saturday. Subsequent investigations revealed that he had transferred approximately Rs.70 crore to Paun’s real estate firm. The most recent transaction occurred in January 2025, involving Rs.59 lakh, with an earlier transfer of Rs.1.75 crore in mid-2024. Additionally, Mehta is believed to have invested around ₹40 crore with another associate, Unnanathan Arunachalam, also known as Arunbhai, an electrical contractor who is currently absconding.
Both Mehta and Paun were presented before the Esplanade court on Sunday and have been remanded in police custody until February 21. The EOW seeks to determine if other bank employees or external parties were complicit in the fraud. The public prosecutor emphasized the need for a thorough investigation, highlighting the impact on numerous depositors affected by the scam.
RBI’s Intervention
In response to the fraud, the RBI has imposed several restrictions on New India Cooperative Bank to protect depositors’ interests. Effective from February 13, 2025, the bank is prohibited from granting or renewing loans and advances, making new investments, or accepting fresh deposits without prior RBI approval. Furthermore, depositors are currently barred from withdrawing funds from their accounts. The RBI has also superseded the bank’s Board of Directors for a period of 12 months, appointing Shreekant, a former Chief General Manager of the State Bank of India, as the administrator to manage the bank’s affairs. A Committee of Advisors has been established to assist the administrator during this period.
Impact on Depositors
The bank, founded in 1968 as Bombay Labour Cooperative Bank and later renamed after the Emergency, operates 28 branches across Maharashtra and Gujarat. As of March 31, 2024, it reported deposits totaling Rs.2,436 crore and advances amounting to Rs.1,175 crore. Under current deposit protection rules, deposits up to Rs.5 lakh are insured and are expected to be paid out within 90 days. While the majority of customers hold deposits below this threshold, the restrictions have led to anxiety among depositors, many of whom have gathered outside the bank’s branches seeking information about their funds.
Ongoing Investigation
The EOW’s investigation aims to uncover the full extent of the fraud and identify any additional individuals involved. Authorities are also working to trace and recover the misappropriated funds to mitigate the losses faced by the depositors. The case underscores the importance of robust internal controls and regulatory oversight in financial institutions to prevent such fraudulent activities.
