Our Business Correspondent
Thiruvanathapuram: India’s public sector banks (PSBs) were established to fuel economic development and safeguard public funds. Yet, recurring episodes of sanction irregularities, fund diversion, audit failures, and apparent insider collusion continue to inflict massive losses on the exchequer, inflate non-performing assets (NPAs), and necessitate taxpayer-funded recapitalisation. The allegations surrounding Punjab & Sind Bank’s Trivandrum (Thiruvananthapuram) branch illustrate a classic case of foul play, raising profound concerns about governance and accountability in PSBs.
The Branch sanctioned business loans of ₹40 lakh and ₹50 lakh to Mr. Shajahan (47 years, S/o Muhammed Ismail, TC 49/156, Kalippankulam, Manacaud P.O., Thiruvananthapuram – 695009) ostensibly for business purposes. Simultaneously, a separate ₹25 lakh housing loan was granted to Smt. Rakhi C.R., who served as the guarantor for Shajahan’s loans. This arrangement points to a concerted effort to fleece public funds. The housing loan was secured against a residential plot of less than 10 cents whose reported market value was less than 50% of the aggregate exposure. This blatant discrepancy indicates a loan granted disproportionately to the value of the surety, with bank officials, the borrower, and the guarantor seemingly colluding. Crucially, no independent valuation report, income proof, or proper KYC verification of the guarantor appears to have been obtained—direct violations of RBI’s Master Directions on credit appraisal, housing finance, and Loan-to-Value (LTV) norms, which generally cap such loans at 80% of property value. This was not mere negligence but a deliberate overlooking of stipulated norms to facilitate the sanction.
Evidence further indicates end-use violations of a grave nature. The business loan proceeds were allegedly diverted to purposes other than the sanctioned activity, with a portion suspected to have directly benefited the guarantor, Smt. Rakhi C.R. This contravenes RBI guidelines on end-use monitoring, which mandate quarterly utilisation certificates, site visits, and rigorous fund-flow tracking. Such diversion not only exposes the bank to unwarranted credit risk but also constitutes a serious lapse that can attract criminal provisions when facilitated by banking officials.
The handling of recovery deepens the suspicion of selective inaction and possible collusion. The bank took possession of the guarantor’s property under the SARFAESI Act about five years ago, a move later upheld by the High Court of Kerala. Despite this legal victory, the bank has not taken effective steps to recover the outstanding dues, now amounting to approximately ₹2.25 crore including interest. It has failed to evict the occupants or initiate auction proceedings, granting what appears to be undue leverage to the defaulters. This five-year paralysis in enforcing SARFAESI timelines allows interest to accrue and provisions to balloon, ultimately burdening public funds. In a striking display of audacity, Rakhi, the defaulter’s guarantor and also a borrower, had reportedly filed a complaint to the Prime Minister through the online portal pgportal.gov.in, urging the PM to “save” her from the debt “trap.” This plea, made with the hope that the Prime Minister’s intervention could result in writing off the loan, highlights the defaulters’ strategy to evade repayment by seeking political patronage, further compounding the loss to the exchequer.
This inaction is a stark contrast to the SARFAESI Act’s intent. The Act, 2002, was enacted to empower banks to recover NPAs swiftly. The standard procedure is clear and time-bound: after a 60-day notice, the bank can take possession and must then proceed to auction the asset within a reasonable time. In the Trivandrum case, the bank has already completed the critical step of taking possession years ago and even secured a favourable High Court order—yet it has taken no further action. This is a blatant deviation from the SARFAESI mandate.
By comparison, the 2018 Punjab National Bank (PNB)-Nirav Modi scam involved a completely different modus operandi. There, insiders issued fake Letters of Undertaking (LoUs) worth over ₹12,000 crore without creating any security interest, making SARFAESI unusable. Recovery relied on lengthy criminal probes. While the Nirav Modi scam exposed the dangers of creating fraudulent unsecured exposures, the Punjab & Sind Bank Trivandrum allegations reveal an equally damaging failure: wilful inaction even after the bank had secured assets in hand and full legal powers. Both cases highlight the same underlying systemic rot in PSBs—weak controls, possible insider complicity, and a shocking disregard for public funds.
The branch is also alleged to have disbursed multiple loans, permitted large cash withdrawals, and accepted cheques from linked defaulting accounts, with proceeds reportedly used to acquire high-value properties near Thiruvananthapuram Airport. Internal audit, concurrent audit, and AML monitoring mechanisms failed to identify or escalate these red-flag transactions over several years, pointing to a systemic collapse in both automated and manual oversight.
When a senior journalist escalated the matter, the response from the bank’s top leadership was notably evasive. The CMD of Punjab & Sind Bank replied with a generic claim that the matter had been “suitably dealt with” and hid behind customer confidentiality. This evasiveness was further compounded when clarification was sought on the reported corrupt practices. In a bizarre and obstructive move, the Deputy General Manager of the bank’s Head Office demanded “valid ID proof such as Aadhar Card, PAN, etc along with specific supporting evidence” from the journalist before offering any response. The scribe has posted the queries from his official email id that had his professional identity. This demand is not only absurd but also deeply troubling, suggesting a strategy to deter whistleblowers and the media, shield potential wrongdoing rather than investigating serious allegations that compromise public funds. While banks are bound by confidentiality rules, using them to block inquiries into potential corruption and demanding identification from those raising alarms is a perverse interpretation of the law.
These Kerala allegations gain sharper context from a parallel scandal in Rajasthan. In January 2026, the CBI registered FIRs against former branch heads at Punjab & Sind Bank’s Sri Ganganagar branches for opening 17 mule accounts using forged KYC documents and routing over ₹1,621 crore in illicit funds. The modus operandi—insider collusion, bypassed KYC/AML controls and fabricated documentation—bears disturbing similarity to the patterns alleged in Trivandrum.
Punjab & Sind Bank has a documented history of AML lapses, including a ₹2.878 crore penalty from FIU-IND in 2019. Nationally, the RBI’s FY 2024-25 report recorded 23,879 fraud cases worth ₹34,771 crore, many involving insider-enabled loan diversion and mule accounts. The Trivandrum violations are multiple and serious: breach of LTV, valuation and KYC norms at sanction; diversion of business loan funds; failure of end-use and AML monitoring; and prolonged inaction in SARFAESI recovery. Such conduct prima facie attracts Section 3 of the Prevention of Money Laundering Act, 2002, and IPC Sections 409 (criminal breach of trust by banker), 420 (cheating), 467 (forgery) and 120B (criminal conspiracy).
Given that this bank is owned by the Government of India, its conduct is nothing short of incomprehensible. A deep mystery pervades its dealings, from the initial collusive loan sanction to the deliberate paralysis in recovery and the obstructive response to whistleblowers. This is not merely a case of oversight; it appears to be a systemic failure bordering on complicity. Public sector banks cannot continue to function as conduits for diverting public funds while ordinary citizens bear the cost. The Trivandrum case, with its baffling and mysterious conduct, demands not just an investigation, but a full-scale overhaul and decisive accountability to restore faith in our public institutions.