KARUVANNUR

In 2000, AL Devassy, a pickup autorickshaw driver, and his wife Philomena, a nurse at a government hospital, pooled their life’s savings – amounting to a few lakhs – and put it in a savings account at the century-old Karuvannur Service Cooperative Bank near Irinjalakuda town of Thrissur district in Kerala.

“We chose this bank because almost everyone we knew had invested their money there. Bank officials engaged with the locals positively and gave good interest rates for short-term fixed deposits. We put our money in such short-term FDs for a period of three months… of nine months… and post maturity we would deposit it again with the accumulated interest. It was decent,” said 80-year-old Devassy, sitting in the somewhat unkempt drawing room of his single-storey home in Mapranam village of Thrissur.

As opposed to private and public-sector banks, the Karuvannur bank, belonging to the state’s entrenched cooperative sector and controlled by the Communist Party of India (Marxist) or CPI(M) leadership held deposits of low and middle-income families in the area and thus kept financial dealings with its members uncomplicated and free of bureaucratic hurdles.

But it seemed that the bank was not transparent enough with its investors.

Collapse of the cooperative banks

In July 2021, the then secretary in-charge of the bank ES Sreekala filed a police complaint alleging that a group of employees were swindling crores of rupees through various methods including issuing fraudulent loans to non-members and mortgaging properties of borrowers without their knowledge.

The investigation was handed over to the crime branch division of the police in August 2021, based on 16 first information reports (FIRs) at different police stations filed after receiving complaints from depositors and borrowers.

By then, rumours began to spread that the bank had collapsed, triggering panic in the community.

Devassy said he chose not to believe the “rumours” about the bank’s financial health as he had good relations with the staff there.

In June 2022, his faith in the institution hit a wall when his wife Philomena, a rheumatoid arthritis patient, was admitted to the Thrissur Medical College Hospital after her condition deteriorated suddenly.

The government hospital was overflowing with patients, and it took about five days to get the results of medical exams, he said. “I knew I had to shift her to a private hospital where she would get better care. But I did not have enough money on hand. So, I went to the Karuvannur bank to withdraw some cash from the account… My wife and I together had ₹31 lakh in deposits… but, to my shock, the manager said that I could not take out the money from my account as cash reserves were low. I told him about my wife’s situation, but they were unmoved,” Devassy said.

“I made phone calls to top CPI(M) leaders in the district as well as officials of the Kerala Bank (the apex bank in the cooperative sector) urging them to release funds for my wife’s treatment… but, they did nothing,” he added.

On July 27, exactly a month after she was admitted to the government hospital and before she could be shifted to a private facility, Philomena died.

On July 27, exactly a month after she was admitted to the Government Medical College hospital and before she could be shifted to a private facility, Philomena passed away. An irate and distraught Devassy took his wife’s remains from the hospital directly to the main branch of the Karuvannur bank where he displayed the body on the main road as his mark of protest.

“The bank officials are responsible for my wife’s death. If they had released the funds from my account, which I am entitled to, on time, I could have taken my wife to a private hospital where her health could have improved. They must answer for my wife’s death,” said the octogenarian.

Ironically, the bank cleared ₹2 lakh for disbursal to Devassy on the day his wife died. Shortly thereafter, seeking to contain the damage, Irinjalakuda MLA and higher education minister R Bindu visited Devassy’s home twice to hand over cheques from his bank account. But the gesture was too late, he said.

History of Cooperative Banks

The alleged siphoning of funds and corruption at the Karuvannur bank, currently being probed by the Enforcement Directorate (ED) under provisions of the Prevention of Money Laundering Act (PMLA), has put the spotlight on the perceived decay within the extensive cooperative banking sector in Kerala. Shortly after complaints were filed in connection with the Karuvannur bank, reports of irregularities have also cropped up in several other cooperative institutions like Kandala service cooperative bank in Thiruvananthapuram, Mylapra bank in Pathanamthitta and Pulpally bank in Wayanad.

In fact, State Minister for Cooperation VN Vasavan had told the state Assembly in 2022 that 399 cooperative institutions had reported irregularities over a period of six years. Around 164 of such societies had failed to pay back deposits of customers after the completion of the maturity period, he said.

The first cooperative was set up in the state in 1914 by Maharaja of Travancore, His Highness Sree Moolam Thirunal Ramavarma, through a proclamation introduced “The Travancore Co-operative Societies Regulation Act”. In 1943, it was converted into Travancore Central Cooperative Bank and in 1956, the bank was elevated as State Cooperative Bank for State of Kerala having district cooperative banks under its regulatory control. In July 1966, it was included in the second schedule of Reserve Bank of India bringing it under the Central Bank’s regulations.

As of March 2023, Kerala has a total of 16352 cooperative banks and primary agricultural credit societies (PACS), out of which 12241 are working, 3466 dormant and the remaining 645 under liquidation. These cooperative in Kerala has close to 30 million members. The CPM-led LDF regime in 2019 merged 13 district cooperative banks to form the Kerala Bank which works at the apex level. At the primary level are hundreds of credit societies, rural and urban banks which cater to all sections of society from farmers to taxi drivers, tailors to washermen and expatriates to lime shell workers.

Cooperative Politics

In a state where politics pervades most realms of society, the cooperative sector is no different. All banks and credit societies are politically controlled with routine elections held on party tickets to choose members of the governing board. A majority of these institutions are controlled by the CPM which has a pervasive grassroot structure. However, other parties like the Congress, Indian Union Muslim League (IUML) and Kerala Congress (M) also have control over such institutions in their areas of influence.

While irregularities have been reported in the past in cooperative banks invariably leading to police probes and solutions being found internally to resolve depositors’ complaints, it is the entry of a central agency like ED in the picture that has muddled the political waters in the state. A day after it raided the premises of CPM MLA and former minister AC Moideen in connection with the Karuvannur scam in late July, the CPM hit out strongly at the agency and the BJP-led government at the Centre for targeting opposition politicians.

“It was an attempt to create a wrong public impression about Moideen who leads an unsullied political life. This is part of the central government efforts to weaken the opposition using central agencies. The party calls for strong resistance and protests against such interventions by the Centre,” the CPM state secretariat said in a statement back then.

On Sept 23, Chief Minister Pinarayi Vijayan, speaking at a public meeting, doubled down on the ‘intrusions’ by central agencies. “There is a special eye being trained on Kerala’s cooperative sector. There is a special agenda because thousands of crores of rupees are in the form of deposits in these banks. Vulture eyes are being trained on these banks and there is a great deal of greed,” the CM alleged.

While the ED has so far arrested four accused in the Karuvannur scam including a local CPM councillor, it has extended the probe to other cooperative banks in Thrissur district where the money was illegally routed and deposited by the accused. “Investigation revealed that the loans were illegally sanctioned and disbursed to these persons and their benamis from the Karuvannur Service Cooperative Bank Ltd in cash without any sufficient collaterals as part of a systematic conspiracy hatched and perpetuated by the Secretary and Committee members of bank in connivance with the then bank manager,” the agency said in a statement.

“The complainants in the scam approached the ED because the earlier police probe in the case was not proper. It was limited to a few bank officials and didn’t uncover the higher political links. So in many ways, the ED was invited and brought in. Let them conduct a fair and free probe. But it shouldn’t be politically biased,” said Karakulam Krishna Pillai, chairman of the Congress’ cooperative wing.

At the same time, he said the irregularities in a few banks shouldn’t be misinterpreted as a general phenomenon pervading the cooperative sector in the state. “There is a need to stand with the cooperative sector which has contributed a lot to the growth of the state and its people,” he said.

Seizing the opportunity to corner the LDF government over its handling of Karuvannur bank and other party-controlled institutions, the opposition Congress and BJP have conducted padayatras and public meetings. While Congress Thrissur MP TN Prathapan was the first off the block to hold a padayatra against the corruption in Karuvannur bank, the party-led UDF also held a recent ‘sahakari sangamam’ in Thiruvananthapuram as part of its protests.

The BJP, which sees Thrissur as one of the parliamentary constituencies where it fancies chances of winning next year, held an 18-km padayatra on Oct 2 in front of Karuvannur bank which was led by former Rajya Sabha MP and actor Suresh Gopi. Already declared as the party’s candidate in Thrissur, Gopi met the victims of the scam and promised the party’s support.

Unending Suffering

Barely three kilometres away from Devassi’s house, 48-year-old Mini is mourning the demise of her differently-abled brother Sasi Kolangattuparambil, the sixth and most recent death of an individual that has a direct connection to the alleged financial fraud at the Karuvannur bank.

Much like Devassy, Sasi and his mother had combined deposits at the bank to the tune of ₹ 13.5 lakh which his father had pooled in after the sale of a part of their property. A staunch Communist, it was natural for Sasi’s father to pick a party-controlled bank to store his assets. But he didn’t realise the same party would cause grief to his family after his death.

“My brother Sasi had deformed legs which prevented him from leading a normal, active life. On August 22nd, his blood pressure suddenly rose and when we took him to a private hospital, doctors said a nerve had cracked open leading to internal bleeding. They conducted a surgery but his condition did not seem to improve,” said Mini on a recent afternoon at her home.

Also, the treatment at the private hospital came at a huge cost and Mini, a homemaker, with an elderly mother had no savings to dip into. She contacted the Karuvannur bank officials with a request to withdraw funds from her family’s account. The governing board members convened a meeting the next day to discuss Mini’s request and by the end of it, concluded to allow disbursal of ₹25000 which was later revised to ₹50000.

“When I told them it wasn’t enough, the bank officials simply said they had no money to give. We somehow raised around ₹5 lakh from friends and family and spent it all on his treatment. We wanted him to improve, but unfortunately, his condition kept dipping. Despite deposits of ₹ 13.5 lakh, all that the bank officials released was ₹ 1.5 lakh which was grossly insufficient,” said Mini.

“Unable to pay the bill at the private hospital, we shifted him to a palliative care facility where my brother died on September 30 at the age of 53,” she added.

Sasi, she said, would have lived longer if he had been given good treatment. “Not being able to use our own money from the bank is frustrating. Even after his death, bank officials have not called me or spoken to me.”

ENDS