RBI Audit Uncovers Shocking Rs 122 Crore Embezzlement at New India Co-Operative Bank: Former GM and Developer Arrested

A routine RBI audit at New India Co-operative Bank uncovered a Rs 122 crore cash shortfall, leading to the arrest of former GM Hitesh Mehta for embezzling funds. The investigation also revealed developer Dharmesh Paun assisted in funneling the stolen money. The bank’s board was superseded due to serious governance issues, highlighting systemic problems in India’s co-operative banking sector during the RBI audit.

RBI Audit Uncovers Shocking Rs 122 Crore Embezzlement at New India Co-Operative Bank: Former GM and Developer Arrested

A routine RBI audit at the New India Cooperative Bank in Mumbai uncovered a massive Rs 122 crore cash shortfall, as revealed by a senior bank employee’s statement obtained by India Today TV. The discrepancy was found during an RBI audit conducted at the bank’s corporate office in Prabhadevi and its Goregaon branch.

The statement described how RBI officials, including Deputy General Manager Ravindran and officer Sanjay Kumar, arrived for the audit on February 12. While inspecting the bank’s safe and cash records, a significant gap between the cash on hand and the recorded amounts was discovered. The officials found Rs 122 crore missing, along with additional discrepancies at the Goregaon branch.

After informing the senior bank staff of the findings, the RBI team warned of serious consequences if the whereabouts of the missing cash were not revealed. During a private discussion, Hitesh Mehta, the bank’s Head of Accounts and GM, allegedly admitted to embezzling the funds, which he began siphoning off during the COVID-19 pandemic.

The police initially filed an FIR before transferring the case to the Economic Offences Wing (EOW), which later arrested Mehta after conducting a search at his residence.

On February 14, 2025, the Reserve Bank of India (RBI) took the significant step of superseding the board of New India Co-operative Bank in Mumbai due to severe governance issues. This move highlights the ongoing governance challenges within India’s co-operative banking sector. While the RBI’s intervention helped avert a larger crisis, systemic problems remain entrenched.

The RBI appointed Shreekant, a former State Bank of India (SBI) chief general manager, as an administrator to oversee the bank’s operations. He will be supported by advisers Ravindra Sapra, also a former SBI general manager, and chartered accountant Abhijeet Deshmukh.

This situation is part of a broader issue in the co-operative banking sector, where governance failures continue to plague many institutions. While some indicators like non-performing assets (NPAs) and profitability have improved, the frequent closure of co-operative banks—around 43 banks in the past four years, including 15 in 2024—presents a different reality. Thousands of depositors have been left stranded, with those holding larger deposits often facing long waits for reimbursement.

The root cause of these failures is largely poor governance. Co-operative banks, designed to serve communities, are often marred by political interference, weak oversight, and outdated practices. Political ties rather than financial expertise often drive board appointments, fostering cronyism and increasing the risk of mismanagement.

For instance, the New India Co-operative Bank case, involving the alleged embezzlement of Rs 122 crore by top officials, reveals severe internal control deficiencies. The RBI’s decision to bar the bank from accepting deposits and issuing loans underscores the seriousness of the situation.

Rather than shutting down co-operative banks, the focus should be on reform. Structural changes, including professionalizing leadership and strengthening supervision with real-time monitoring, are essential. Governance norms need significant improvement, with stricter enforcement from the RBI. Public awareness about the risks associated with co-operative banks and deposit insurance must also be raised.

Without urgent reforms, co-operative banks may continue to tarnish their role in fostering financial inclusion, leaving behind a legacy of broken trust. The New India Co-operative Bank scandal serves as another critical reminder of the need for decisive action.

On February 15, 2025, the Economic Offences Wing (EOW) of the Mumbai Police arrested Hitesh Mehta, the former General Manager and Head of Accounts at New India Cooperative Bank, for allegedly embezzling Rs 122 crore from the bank’s safe. The following day, the police also arrested Dharmesh Paun, a developer, for his role in assisting Mehta in channeling the stolen funds.

The arrest came after the bank’s CEO, Devarshi Shishir Kumar Ghosh, filed a complaint against Mehta. Police investigations revealed that Mehta had misappropriated Rs 70 crore with Paun’s help between 2019 and January 2025. The investigation uncovered transaction records showing that Mehta transferred Rs 1.75 crore to Paun between May and December 2024 and another Rs 50 lakh in January 2025.

Both Mehta and Paun have been evasive in their responses, prompting police to investigate further to determine if other individuals were involved. The police also sought clarification about the role of auditors, with Paun’s defense team questioning their oversight during this period.

The crime was exposed during an RBI audit on February 12, 2025. RBI officials, while checking the bank’s safe in the Prabhadevi office, found a significant cash shortfall—Rs 112 crore missing from the safe, in addition to Rs 10 crore missing from the Goregaon branch. During questioning, Mehta allegedly confessed to taking the money and handing it over to others. After further investigation, Rs 50 lakh was recovered, and Mehta promised to return the remaining funds.

Both Mehta and Paun are currently in police custody until February 21, 2025, as investigations continue.