Series of money-swindling scandals confront small banks
A series of money swindling scandals have engulfed several Thrift and Credit Cooperative Society (TCCS) banks while the Department of Co-operative Development (DCD) and the Provincial Co-operative Development Commissioner (PCDC) have been accused of inaction. A large number of small depositors, lured by the comparatively higher interest rates offered by some of these institutions, have lost their life savings and don’t know who to turn to as their complaints to the state authorities have resulted in little action, several disgruntled depositors said. At least two of these institutions are on the verge of collapse with Rs. 600 million misappropriated due to loan-book exposure to microfinance, default rate, corruption and frauds, they disclosed. Demands for refunds from depositors have fallen on deaf ears.
Official records in the possession of depositors show that 19 present and former office bearers including the present president, former secretary, former treasurer, former directors, their spouses and sons have defaulted loans amounting to over Rs.250 million taken from the 532 C Wattegedera (Maharagama) TCCS Ltd. Several land deeds mortgaged with the Wattegedera TCCS for loans have gone missing while several other deeds had been re-mortgaged by the previous management, a member of the depositors association told the Business Times. The previous management had destroyed files with documents and deleted computer data to cover up their corruption, fraud and mal practices, he disclosed. Police have filed a case at the Gangodawila Magistrates Court following complaints lodged against the management.
But both state agencies tasked with supervising these institutions – similar to the Central Bank supervision over commercial banks and other registered financial institutions – have on their own failed to probe these financial crimes punishable offences under the Penal Code, he said. A large number of thrift and credit co-operative societies – categorised as co-operative banks as they perform banking functions at grassroot level – are supervised by provincial councils. In a classic passing-the-buck, the Assistant Commissioner of Cooperative Development (Administration) K.M.M. Chaminda told the Business Times that it was the board of directors of these institutions that are responsible for all financial transactions of the co-operative society and legal action could be taken against the management in case of mismanagement. But the authorities have been silent about their role in proper supervision of these units.