The Anti Corruption Bureau (ACB) in Karnataka searched the offices of Sri Guru Raghavendra Co-operative Bank and its office bearers on Thursday, in connection with a case of alleged fraud.
The ACB confirmed in a statement to the press that the head office and a branch office of the bank, both located in Basavangudi in Bengaluru, the office of Gurusarvabhouma Co-operative society and residences of bank chairman K Ramakrishna and former Chief Executive Officer Vasudev Maiya were searched.
"Money invested by customers into Sri Guru Raghavendra Co-operative Bank was misappropriated to the tune of Rs 1400 crore after money was transferred illegally by bank officials In violation of the rules of the Reserve Bank of India, few bank officials created artificial deposits and lent Rs 150 crore to 60 fictitious customers," stated the release which quoted reports compiled by the RBI and Registrar of Co-operative Societies..
In its brochures and on its website, the bank had claimed NPA's of around 1% but the actual NPAs were in the range of 25% to 30% as per reports of the registrar.
The bank has been in trouble since the start of the year when the RBI put curbs for alleged irregularities in transactions. It is head-quartered in Basavangudi in Bengaluru and has been operational since 1999, as per the bank's website.
The RBI restricted the bank from "granting or renewing loans and advances, making investment, borrowing funds or accepting fresh deposits".
Panicked depositors rushed to withdraw Rs 35,000 (the cap placed on withdrawals) following the RBI's announcement. The depositors told TNM that a lack of transparency among bank officials had increased fears among people who invested in the bank.
Acting on orders of the RBI, the state government in Karnataka appointed an administrator - AC Diwakara - who took over power from the bank's board of directors. However, this move was challenged by the bank management who sought a stay on his appointment in the Karnataka High Court.