How a multi-crore cooperative bank scam in Kerala has shattered lives of depositors

The Rs 100-crore Karuvannur bank scam in Kerala received media attention after TM Mukundan, a former Panchayat member died by suicide in July last year, allegedly after receiving a foreclosure notice for recovering money he never borrowed. The scam received limelight again following the death of 70-year old Philomena, who died on July 27 this year. Philomena's family staged a protest in front of the Karuvannur Service Cooperative bank in Thrissur district by keeping the dead body there. 

They alleged that they were not allowed to withdraw the money parked in the bank for her medical treatment. After the government intervened the bank has now returned the money to the family.  The fraud came to light in 2019, when the Joint Registrar of Cooperation (Thrissur) ordered a probe. However, though the probe was completed in October 2020, no action was taken.

The multi-crore scam came as a blow to the cooperative sector in the state, which has a well-developed banking model. The Karuvannur Cooperative Bank is controlled by a board, the members of which are local CPI(M) functionaries. The scam occurred allegedly with the knowledge of the board members. The misappropriation of money was carried out by forging signatures and documents. Though several arrests have been made, the depositors stare at a bleak future and risk losing their lifetime savings. TNM spoke to some depositors, who are waging a battle to get back their deposits. 

Joseph

Sixty-year-old Joseph deposited his savings made through working in the Gulf in Karuvannur bank. He has three children and two of them have disabilities. “Initially we used to get interest for the money we deposited, but that stopped gradually. We were given an assurance that the bank will soon have a tie-up with the Kerala Bank and that the amount deposited will be returned. After around six months we were told by the bank authorities that a consortium has been formed and the money will be returned in two months. Later, we were informed that the government will take over the bank.  It has been two years since we have been told of such excuses. Initially they (the bank staff) used to behave well. But gradually, after all the issues were exposed, they began to ignore us. I have told them many times that I have kids who are differently abled,” Joseph said.

The bank later told Joseph that an administrator has been appointed and if we go the head office can meet him in person. “However, the administrator was not there when a few of us went to the bank. This happened several times. Finally when we met the administrator in Thrissur he told us that he was only a part-time employee and had no idea how the money would be returned,” says Joseph. He feels that the administrator was appointed only to assuage the feelings of depositors and take them into confidence. 

The Registrar of Cooperatives, however, removed the administrator MC Ajith and a three member administrative panel was given charge of the bank in July. Ajith's appointment was opposed as he had been auditing the bank accounts for the past four years and failed to detect the fraud.

Watch the video of Joseph speaking to TNM 

Velayudhan

Velayudhan, 70, is an auto rickshaw driver. A resident of Peechampallikkonam near Mapranam, he was an employee of the Health Department.

“I initially made a fixed deposit of Rs 8 lakh, which was later transferred as a savings bank account. I had also joined a chitty and another Rs 8 lakh was deposited. There were two other deposits of Rs 3.5 lakh and Rs 1.05 lakh. The bank has to return all the money,” says Velayudhan, who stays in a rented house. 

He recently approached the bank seeking money for his treatment. “If we apply to withdraw Rs 50,000 only Rs 10,000 would be given. The bank staff was cordial when they came to us for a deposit drive. It changed when we started seeking the money bank. Now that I am not well I can’t ride the autorickshaw. I have issues with my spinal cord but can’t go to a doctor for specialised treatment,” says Velayudhan. He had also demolished an old house and started constructing a new one but the work had to be stopped half way.

Velayudhan too has not much hope about the government’s assurance that the money will be returned. “There was a meditation meeting but none of the leaders or the administrator turned up,” says Velayudhan. 

Watch TNM's interview with Velayudhan 

Devassy

Devassy, now an 80-year-old, made his living in Mumbai for 40 years. He and his wife Philomena began depositing their savings at the Karuvannur bank back in 1995. Philomena was an employee of the Health Department. She was admitted in hospital in June this year and the family could not afford the treatment suggested. After her death, the family alleged that it was because of the bank’s failure to return the deposit despite repeated requests. They had deposited Rs 30 lakh in the bank.

“She was first taken to a government hospital and from there to the medical college hospital. The doctors there after examinations prescribed costly medicines. They suggested administering an injection thrice a day which was priced Rs 5,500 per dose. But since her body rejected the medicine the injection could not be continued. The doctors said the name of the disease which I didn't understand. The treatment was good, but the number of patients was too high and it was tough for the staff to manage.  We thought of shifting her to a private hospital but I could not afford it,” Devassy told TNM.

Devassy’s account was with the Mapranam branch of the Karuvannur bank. “The staff were never friendly during the branch visits and I was afraid their behaviour would provoke me to say something not fair,” says Devassy who then approached the office of the bank’s Assistant Registrar at Irinjalakuda, which is a higher authority.

Devassy says the visit was not helpful as he had no idea whom to approach. He also met the Karuvannur branch manager and appraised him about his situation. “I called CPI(M) district secretary MM Varghese, who promised to communicate with the bank, but the money was not returned even after that,” says Devassy. The couple saved money by starting fresh fixed deposit accounts with the interest of previous deposits and their fresh earnings. “I have never withdrawn the money, the bank has not given even a penny in return. Yet the minister stated that the bank gave money for treatment, which is a lie. Giving back deposit money is not helping. If they have given me at least Rs 10 back for the treatment they should prove it. I believe my wife;s life could have been saved if we had got money on time,” he says. 

What prompted the family to stage a protest with the dead body was a statement from Higher Education Minister R Bindu, who is also the local MLA, that they politicised the  issue through the protest and that the money was given to the family before the death of Philomena. The minister visited their home on August 7 to return the money. 

Watch TNM's interview with Philomena's family 

Princy

It was in 2016 that Princy deposited the money she received as retirement benefits in Karuvannur Cooperative Bank. She used to work in the Panchayat Department and is the sole breadwinner of the family.

"The money was deposited as savings to be used for my daughter's wedding.  My husband is a heart patient who underwent an open heart surgery. The bank would give us Rs 10,000 in four months when we asked them to return the deposit,” says Princy, who does not have any other source of income. Her husband did not have a job and they found it hard to raise money needed for medicines and treatment. “We don't have money to pay for the tests. This has taken a toll on us mentally too. We fear that we will go through the same situation as that of Philomena,” says Princy. 

She alleges that the accused in the bank scam, who are now out on bail, are living a life of luxury. “They should introspect what they did to the hard earned money of people like us,” says Princy. With the money from deposits she could at least meet basic necessities of life. Princy says they want to marry off the children but cannot proceed with the proposals because they can’t get back the money. “The bank would give only Rs 4 lakh out of Rs 18.5 lakh if we apply now. And for that we should provide proof of the wedding,” says Princy.   She is differently abled and it is not easy for her to commute to Irinjalakuda, which is the nearest town, often for bank transactions. 

Princy says she knew Philomena personally and believes that comments made by the minister were wrong. “The family was expressing their grief through the protest. But the minister overlooked that. She also ignored the luxurious lifestyle of the accused,” she alleged. 

Princy wants to know why the bank officials failed to act on time despite learning about the scam. “They should have known this at some point, but still they turned a blind eye. The board members who had deposits in the bank withdrew the money when they came to know about the misappropriation. The scam came to light only after they withdrew the money. It was poor people like us who got cheated. We didn’t know that the bank was a sinking ship as our trust was firm,” says Princy. 

Her hope of getting back the money has faded. It’s been a year and the amount of money they return is becoming less and less and the interval longer. “I know one depositor who had to get Rs 2.5 lakh but only one lakh was returned for the wedding of their daughter. She couldn’t even buy a good saree,” says Princy.

Watch TNM speaking to Princy