Punjab and Maharashtra Co-operative Bank (PMC) created more than 21,000 fake accounts to hide loan, a complaint revealed.
The complaint that was filed with the Economic Offences Wing (EOW) of Mumbai Police accused the lender's management of hiding bad loans and disbursing loans that eventually led to a loss of around Rs 43.55 billion.
Reuters reported that a single realty firm and its group companies benefitted the most with 44 loans.
The complaint said: "The actual financial position of the bank was camouflaged, & the bank deceptively reflected a rosy picture of its financial parameters,'' highlighting that fraudulent loans never entered into the bank's core banking system.
Under-reporting of bad loans was a major issue at Punjab National Bank (PNB), where a whopping $2 billion fraud was unearthed.
The complaint has accused the bank's Chairman, Waryam Singh, and its Managing Director Joy Thomas, along with other bank officials of criminal breach of trust, forgery and falsification of records.
Along with officials from PMC banks, the complaint named bankrupt realty company Housing Development and Infrastructure Ltd (HDIL), along with its former senior executives Sarang Wadhwan and Rakesh Wadhwan, who were beneficiaries of the loans which eventually went on to become non-performing assets.
A senior investigating officer said the matter of the alleged wrongdoing by HDIL in the PMC case will be looked into and the entire investigation is expected to be completed within two months. Notably, the PMC bank case is the latest in series of matter which has rocked India's already beleaguered banking system that is struggling with a multi-billion dollar fraud at the government-owned bank PNB, the collapse of a major infrastructure lender IL&FS leading to liquidity squeeze that has hit shadow lenders.
A number of retail customers of PMC bank gathered in front of the RBI office in Mumbai on Tuesday and demanded the apex bank and government to take action to release their funds. Last week, RBI has put restrictions on withdrawal allowing only Rs 1000 to be taken by the bank's customer, however, the limit was later raised to Rs 10,000.