Kerala ESSS Church mutual funds scam: RBI orders closure of Mythri scheme

The Reserve Bank of India has ordered the closure of Mythri, a deposit scheme run by the Ernakulam Social Service Society (ESSS) of the Varappuzha archdiocese, alleging that the church has diverted investors' money to mutual funds without their knowledge.

The Times of India reports that RBI found ESSS had diverted Rs 4.25 crore into mutual funds, enabling the society to gain Rs 25-30 lakh per year. The investors were not given any share of the dividends received by society. The RBI has also forwarded the case to Economic Offence Wing of Kerala police. The RD scheme had been running for the last 25 years.

The alleged scam came in to light when a balance sheet of the ESSS was filed before the registrar of Society and it was found that Rs 4.25 crore marked for “investments in mutual funds”.

Later RBI served a notice for the scheme to be stopped, which had around 30000 members.

“The ESSS has served notices to all the 70 parishes under the diocese, announcing the closure of the scheme before announcing the launch of a new one. However, the ESSS has not mentioned about the circumstances, which led to the closure. While the notice said that the capital will be returned to the members, the ESSS was mum about the dividends they had earned from the deposit money,” Jacob Santhosh an RTI activist who had brought the issue to RBI's attention told ToI.

“In a public notice, the ESSS has admitted that the scheme was running for the last 25 years. So, on an average if they have received a dividend of Rs 25 lakh per year, it would amount to Rs 6.25 crore now. When added to the investment of Rs 4.25 crore, the money earned by the ESSS comes close to around Rs 11 crore,” he added.

However, ESSS director Fr Antony Raphel Komaranchath said that they were not aware of RBI regulations restricting investment in mutual funds.