Hit by banking frauds, labour dept reviews security of over Rs 2,500 crore in FDs

Srinath Rao
Maharashtra labour department, Maharashtra state labour department, labour department loans, labour department FDs, Maharashtra labour department FDs, India news, Indian Express

In May, the Mumbai Iron and Steel Workers Board discovered that Rs 36 crore out of a sum of Rs 41 crore held in an FD at the State Bank of India branch in Mazgaon had been siphoned off, allegedly by then branch manager Nikhil Roy, who is still absconding.

After being hit by two banking frauds this year and suffering losses of Rs 41 crore meant to be utilised for the welfare of over two lakh registered head loaders or Mathadi workers, the state labour department is reviewing the security of more than Rs 2,500 crore held in Fixed Deposits (FDs) across Maharashtra.

The arrest this week of Tribhuvan Yadav, the manager of the Saki Naka branch of the Indian Overseas Bank and his accomplice, alleged serial fraudster and ayurveda doctor Mubarak Wahid Patel, for siphoning of Rs 5 crore held in an FD by the Cloth Market and Shops Board, is the second time this year that a workers’ board has been hit.

Thirty-six Mathadi boards representing labourers working in different unorganised sectors across the state function under the labour department. Under the Maharashtra Mathadi Hammal & Other Manual Workers (Regulation of Employment & Welfare) Act 1969, Mathadi workers receive provident funds, gratuity, medical benefits and bonuses from their employers, which comprise a levy of 40 per cent over and above their salaries, and which boards are required to invest in nationalised banks in the form of FDs. “Until a few years ago, a few boards had opened FDs in a co-operative bank but it went bankrupt and shut down. They lost their money. Since then we have invested only in nationalised banks,” an official said.

In May, the Mumbai Iron and Steel Workers Board discovered that Rs 36 crore out of a sum of Rs 41 crore held in an FD at the State Bank of India branch in Mazgaon had been siphoned off, allegedly by then branch manager Nikhil Roy, who is still absconding.

The investigation was first taken over by the EOW of Mumbai Police, later transferred to the CBI. However, when the state home department took serious cognisance of the case, the probe was handed back to the EOW. “In the Mazgaon case, the branch manager extended an unauthorised overdraft facility to the account without informing the account-holders. The boards routinely speak to banks to inquire about the status of FDs. So it was only when the account-holder asked SBI about its FD that it discovered the fraud,” a labour department official said.

Investigations by the Saki Naka police station also found that Patel had similarly defrauded the Mumbai Iron and Steel Workers Board of Rs 7 crore in 2016 after allegedly colluding with officials at the Bank of Baroda branch in Khadakpada, Kalyan. The Kalyan police had arrested him on November 18 and he was in judicial custody in Thane jail when the Saki Naka police took his custody this week.

Labour department officials said the Mathadi boards started falling prey to banking frauds in 2017. “Our money had been secure until then. We also operate FDs at a particular bank for a year or two depending on rate of interest offered,” an official said.

In 2018, four boards lost a total of Rs 588.39 crore in banking frauds, resulting in the registration of four FIRs. Considering the duration of investigations and trials, the labour department has prioritised recovering some of the stolen money. Last year, the Grocery Markets or Shops Unprotected Labour Board managed to recover Rs 4 crore from the bank where it had its account. However, the Mumbai Iron and Steel Workers Board was not so fortunate as the Andhra Bank refused to return an FD of Rs 2.5 crore siphoned of at its New Panvel branch.

However, the recent spate of banking frauds has led the labour department to consider other alternatives. “We are seriously considering handing over management of our investments to the Employees’ Provident Fund Organisation (EPFO),” said Raviraj Ilwe, Joint Commissioner of Labour. The EPFO operates provident fund for employees in organised sectors.