CPI(M) vs CPI(M): Curious case of co-op bank fraud in Kerala that has made party workers suspect leaders

Scams reported from cooperative banks operated by CPI(M) and its allies in the state are causing irreparable damage to the party and the government in Kerala.

ByK A Shaji

Published Sep 27, 2023 | 3:00 PMUpdatedSep 27, 2023 | 3:00 PM


The CPI(M) in Kerala finds itself on a sticky wicket after the Enforcement Directorate (ED) arrested one of its leaders and Vadakkanchery municipal councillor PR Aranvindakshan in the ₹300-crore Karuvannur Cooperative Bank scam in the Thrissur district,

The scam has caught the ruling CPI(M) on the wrong foot since it has been fighting the Multi-State Cooperative Societies (Amendment) Bill, 2023, fearing it might pave the way for a parallel cooperative movement.

Adding to the party’s woes, Aravindakshan is known as the Man Friday of AC Moideen, former industries minister, and the alleged mastermind of the scam that has affected several investors, mostly card-holding CPI(M) party workers.

The ED has already interrogated Moideen. It has summoned him for another round of questioning, sparking rumours of his imminent arrest.

Moideen was the secretary of the CPI(M)’s Thrissur District Committee when the co-op bank’s board, comprising party leaders and officials owing allegiance to the Left organisation’s employees’ wing, allegedly committed the fraud that landed the financial institution in an unprecedented crisis.

Related: CPI(M) protecting those behind Karuvannur bank scam: UDF

Trust deficit

The scam has made the ruling party face a trust deficiency across Kerala. Over the past few weeks, the ED tightened the screws on the alleged scam, much to the chagrin of party leaders and ministers in the state.

PR Aravindakshan

Arrested CPI(M) leader PR Aravindakshan. (Supplied)

On Monday, 25 September, party State Committee member and former CPM MLA MK Kannan, too, was interrogated.

Making matters further worse for the CPI(M), the party’s alliance partner, the CPI, is also facing allegations of engaging in a scam worth ₹101 crore at Kandala in Thiruvananthapuram district.

Administrators and officials of that bank are to repay ₹57.24 crore, which they allegedly siphoned off. According to information available from Kerala’s Cooperative Department, several financial frauds have already been confirmed in at least 399 cooperative banks across the state. Most of those banks are managed by either CPI(M) members or those belonging to its alliance partners.

The party, which boasted of its leadership role in the cooperative sector by saying the establishments controlled by it have been placing workers and social welfare before profit, is now finding it hard to explain to its cadres the reported maladministration in those institutions.

Though party state secretary MV Govindan has accused the ED of working to help the BJP gain advantage in the state, party cadres at Karuvannur point out that both the villains and victims are party affiliates.

Also Read: Kerala CPI(M) MLA Moideen quizzed by ED for nine hours

CPI(M) at the receiving end

“The party secretary’s statement about the ED investigation in Karuvannur is baseless. It’s a cooperative bank with all its members belonging to the CPI(M) or its affiliates. Both winners and losers in the scam hail from the same party, and now the ED is acting on the complaints lodged by the victims,” local party leader Joshy Antony, who has invested ₹10 lakh in the bank, said.

AC Moideen

AC Moideen. (Supplied)

We were forced to act against the party when it decided to support the scammers, ignoring our concerns,” he told South First. Antony’s account has now been frozen.

Aravindakshan, picked up from his residence at Vadakkanchery, is the first CPI(M) leader to be arrested in the alleged Karuvannur scam.

When the ED started investigating the scam, Aravindakshan and his party colleague KA Jijor provided the central agency with most of the information regarding the scam. Based on their statements, the ED arrested the first accused, P Satheesh Kumar, and the second accused, PP Kiran.

Two days ago, Aravindakshan complained to the Ernakulam Central Police that the ED officials had tortured him during interrogation. However, the ED countered the allegation, saying it had video evidence.

Meanwhile, MLA Kannan termed the arrest a part of a witch hunt and accused the ED of forcing Aravindakshan name him as one of the key beneficiaries of the scam.

Kannan, the vice president of the Kerala Bank, is also the president of the Thrissur Service Cooperative Bank, which is also under the ED probe for providing bogus and fake loans.

Though the Thrissur bank was not authorised to operate chit funds, indications are that such operations were carried out under the pretext of monthly deposits, ED sources said.

The ED also suspects that Kannan used some accounts in the Thrissur bank to help the Karuvannur scammers take the pelf out of the state.

Related: Woes pile up for ruling CPI(M) in Kerala cooperative sector scams

Pinarayi’s assurance: Too late for Philomena

With allegations of financial fraud being raised against different cooperative banks controlled by the party across the state, Chief Minister Pinarayi Vijayan on Sunday said that the deposits in the cooperative banks would be safe and no one would lose a single paise.


Chief Minister Pinarayi Vijayan. (Sourced)

However, critics say the chief minister’s statement was unrealistic, and the government took no action to address the financial struggles of the investors in the past three years since the scam surfaced.

Last year, a 70-year-old investor, Philomena Devassy, at the Karuvannur bank died without having the money to avail of advanced treatment in specialty hospitals.

She had ₹28 lakh deposited in the bank. After auditors detected the scam, the bank turned down requests from its 12,000+ depositors to withdraw their money. Philomena was one among them.

Being penniless despite having a relatively good bank balance, she had undergone treatment for various ailments in several government hospitals in Thrissur for more than a month.

Her husband, Devassy, said he had been knocking on the doors of bank officials for over two weeks, requesting the release of at least a minor portion of the deposit so he could shift her to a better hospital. Devassy, an auto driver, held the bank responsible for his wife’s death.

As per a  reply given by Cooperative Minister VN Vasavan to MLA NA Nellikkunnu in the Kerala Assembly, the frauds in Karuvannur and other banks include sanctioning loans without adhering to government norms, sanctioning loans against receipts of fake fixed deposits, illegal appointment of unqualified staff, malpractice in the calculation of interest on deposits, and releasing loan amounts without security.

CPI(M) blames media

Also included are gold loan scams, mismatches in the stock of medical stores run by them, irregularities in the auctioning of bank properties, looting of money, sanctioning of loans against property beyond the bank’s limit, mismanagement of funds allotted by the government, and illegally allowing a reduction in loan repayment.

Though Vasavan, who also belongs to the ruling CPI(M), claimed that investigations are underway under Sections 65 and 66 of the Kerala Cooperative Act against all the cooperatives that committed financial fraud, nothing happened at the grassroots level. This necessitated the ED’s intervention.

Meanwhile, the CPI(M) State Secretariat accuses the media of blowing the incident out of proportion and tarnishing the image of the cooperative sector.

As per the statement of the minister, the state has 164 cooperative institutions that failed to refund deposits to customers even after their maturity period.

To partially shield itself from people’s wrath, the government recently announced a security amount of ₹2 lakh for each huge deposit in cooperative banks under the Kerala Cooperative Deposit Guarantee Scheme. But it so far remains on paper.

According to Opposition leader VD Satheesan, most investors in cooperative banks are ordinary people, and fraudsters are looting their hard-earned money.

People who live on shoestring budgets deposit their savings in such banks for a secure future. Targeting such people, the scammers forge papers and use their administrative powers to escape punishment.

According to a rough estimate, Kerala has 15,000 cooperative banks and societies.