Scamsters cause irreparable damage to once vibrant cooperative legacy of Kerala

While 55 institutions in the Malappuram district face charges of fraudulent activities, the capital district Thiruvananthapuram has 49 such institutions. The Palakkad district has only three institutions reporting large-scale fraud.

The Karuvannur cooperative bank in Thrissur where irregularities worth over ₹300 crore have been detected. (South First)

Only last week, a cooperative bank in the Thrissur district hit the headlines when a 70-year-old investor died without having the money to seek specialised treatment in well-established hospitals.

Retired nurse Philomina Devassy had ₹28 lakh deposited in the bank, where a massive scam worth ₹300 crore was detected in July last year.

After auditors detected the scam, the bank started refusing withdrawal requests of its 12,000-plus depositors, and Philomena was among them.

Being penniless despite having a relatively good bank balance, Philomina had undergone treatment for various ailments in several government hospitals in Thrissur for more than a month.  Her husband Devassy said he was 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,  said the bank was responsible for his wife’s death.

The Karuvannur Cooperative Bank, where Philomina deposited her savings, is controlled by CPI(M) functionaries.  The police confirmed that at least two depositors with the bank died by suicide after finding out that their entire deposit was lost in the scam.

As per the reply Vasavan gave to MLA NA Nellikkunnu in the 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 poorly qualified staff, malpractice in the calculation of interest on deposits, and releasing loan amounts without security.

Also included are gold loan scams, mismatches in the stock of medical stores run by them, irregularities in 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 the minister, who also belongs to the ruling CPI(M), claimed that investigations are already on under Sections 65 and 66 of the Kerala Cooperative Act against all the cooperatives that committed financial fraud, the whole issue put the ruling party on the defensive.

Head office of Kerala cooperative union in Thiruvanathapuram. (South First)

The state secretariat recent urged people to remain vigilant against organised attempts to destroy the cooperative sector.

The statement accused newsoutlets of blowing things out of proportion and creating a bad image of the cooperative sector among investors and the ordinary people.

In the meantime, the opposition Congress accused the government of conducting an investigation for investigation’s sake under the Cooperative Act and advising the police to go slow on cases where CPI(M) leaders turned beneficiaries.

As per the admissions 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.

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.

As per a rough estimate, Kerala has 15,000 cooperative banks and societies, and they once boasted of their social commitments.

Scams surfaced in a sizeable portion of them when Kerala’s cooperative sector struggled to recover from the effects of an economic downturn, Covid-19, floods, and demonetization.

“Till recently, Kerala’s cooperative banks were known for their stellar performances. They rolled out funds for flood rehabilitation in 2018 and performed well even in the case of Covid-19 compensation. Even the government availed their help to roll out recovery measures to the KSRTC, the public transport wing of the state, and to continue with various welfare pensions,” says J Devika of the Centre for Developmental Studies in Thiruvananthapuram.

“The fraud reports demand strong measures from the government, even against CPI(M) leaders who committed irregularities. Party politics must not hinder regaining people’s lost confidence over cooperative establishments,” she added.

Going by news reports, scams have surfaced in cooperatives run by the BJP, Congress, and the Muslim League as well.

Auditors recently detected a mortgage loan of ₹1 crore given by a cooperative bank in Haripad near Alappuzha to an individual without seeking any jewellery or other valuables as collateral.

There are cases in which those who repaid their borrowed loans in time detected transactions they never did in the passbook and bank accounts. Bank officials might have manipulated their accounts to transfer money they siphoned off from others.

Chief Minister Pinarayi Vijayan addresses a meeting of the heads of cooperatives in the state after 2018 floods, seeking help for reconstruction. (South First)

Observers point out that extreme political interferences are prevailing in the cooperative sector. The largest curse of the sector is the massive political interference in granting loans and accepting deposits, transfers, and even auditing.

According to CN Vijayakrishnan, who heads several well-performing cooperatives in the state, including a high-profile cancer hospital, only a few cooperatives in the state have erred. Yet, the image crisis is now being extended to most honest enterprises in the sector.

“The government must act tough in the case of fraudsters and evolve alternative mechanisms to restore the lost money of depositors. At the same time, it’s the responsibility of all to stand with socially responsible and honest cooperative firms which aim for the overall wellbeing of the state and its people,” he said.