The Income Tax Department has written to the RBI informing it about alleged illegal malpractices being deployed by a number of cooperative banks after its probe found “serious” difference in accounts, to the tune of multi-crore rupees, in the aftermath of the notes ban.
In an analysis report prepared by the department, also accessed by PTI, two specific instances in Mumbai and Pune have been reported where it was found that over Rs 113 crore “excess amount” of old demonetised notes was reported by two banks to the banking regulator in order to generate black funds.
“In the Pune bank case, the reported amount (to the RBI) was Rs 242 crore while physical stock was of Rs 141 crore, showing clearly that the cooperative bank had reported to the RBI excess Specified Bank Notes (old currency) as on December 23, 2016 to the tune of Rs 101.07 crore. In the case of a similar bank in Mumbai, the excess amount of such notes was Rs 11.89 crore,” it said.
The department had conducted surveys on these two banks last year, post the notes ban, and it “detected serious unexplained difference between the old notes reported to the RBI and the physical stock” available in the bank during the said operation.
Officials said it had informed the RBI about these alleged malpractices earlier and is regularly updating it about such modus operandi being deployed by a number of such banks as it apprehends that the “excess reporting of old notes had serious potential for large scale conversion of old notes for new notes even after December 30, 2016 (the last date for the validity of the old notes)”.
In this backdrop, the Reserve Bank of India (RBI) had issued a circular on December 30 last year requiring all banks to deposit all old notes received till December 30, 2016 with RBI chests by the next day, ie, December 31, 2016 and also stating that old notes cannot form part of the closing cash balance of banks as on December 31, 2016.
“A big possible window that would have allowed conversion of black money into white, post demonetisation, by the cooperative bank system was plugged to a larger extent after the I-T department detected these instances. In cases where such an activity has already taken place, the investigation is ongoing and notices have been issued,” officials said. The Income Tax department has earlier raised serious concerns over the working of a number of cooperative banks across the country in a earlier report where it had claimed that they used the “opportunity” of demonetisation to make a quick buck and indulge in money laundering worth several crores.
An analysis report prepared by the department had said tax sleuths found these banks have been involved in generating and routing of black money at an “unprecedented” scale post November 8 when the currency scrap was announced by Prime Minister Narendra Modi.
I-T probe had found that in the case of such a bank based in the small town of Alwar in Rajasthan, the directors of the bank cheated it of Rs 8 crore “by fraudulently obtaining loans in the names of 90 persons of doubtful identities” even as it was used to launder personal “unaccounted cash” of Rs 2 crore by the management.
Several such instances were chronicled by the department in its report submitted to the Finance Ministry and shared with the RBI for action.