The ED searched nine locations in Yavatmal in an alleged Rs 242-crore fraud involving Babaji Date Mahila Sahakari Bank. The probe focuses on alleged collusion in loan sanctions, inadequate collateral, diversion of funds, suspected kickbacks and possible loan evergreening.

Babaji Date Mahila Sahakari Bank Ltd. | File Photo

Mumbai, October 1, 2026: The Enforcement Directorate (ED) Mumbai Zone on Thursday conducted simultaneous searches at nine locations in Maharashtra’s Yavatmal district as part of its money-laundering investigation into an alleged Rs 242-crore financial fraud at Babaji Date Mahila Sahakari Bank Ltd. The federal probe focuses on an alleged deep-rooted nexus between the bank’s senior functionaries and borrowers, through which high-value loans were allegedly sanctioned despite inadequate collateral and negligible assessment of repayment capacities, before being systematically diverted after disbursement.

The searches were carried out under the provisions of the Prevention of Money Laundering Act (PMLA) on the basis of multiple FIRs registered by the Avdhutwadi Police Station in Yavatmal against officials and employees of the cooperative bank and its borrowers.

Alleged Financial Irregularities

The alleged financial irregularities surfaced following multiple public complaints concerning the misuse of depositors’ money. This prompted the Maharashtra government to order a special audit, which closely examined the bank's lending practices and the complicity of its office-bearers.

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Registered under Section 9(1) of the Maharashtra Cooperative Societies Act, the cooperative bank faced severe regulatory action when the Reserve Bank of India (RBI) cancelled its banking licence in 2022 due to a collapsing financial foundation.

According to the ED, the special audit found that the bank’s CEO, chairperson, directors and other officials allegedly acted in connivance with borrowers, valuers and auditors while sanctioning and disbursing loans despite inadequate collateral and insufficient assessment of borrowers’ repayment capacity. The audit estimated the alleged fraud involving the chairperson and other bank officials, in alleged collusion with loan beneficiaries, at around Rs 242 crore. The agency is now tracing the movement of the loan proceeds and is examining how the funds were subsequently withdrawn, transferred or allegedly diverted after disbursement.

The ED is now examining the proceeds generated through the alleged criminal activity and the manner in which these funds were subsequently layered, withdrawn or utilised.

Loan Sanction Process Under Probe

According to the ED investigation, the alleged irregularities originated at the loan-sanction stage, where the bank’s CEO, chairman, directors and other officials allegedly acted in connivance with borrowers, valuers and auditors to facilitate the sanction of loans. Borrowers allegedly received loans with the assistance of bank officials despite deficiencies in collateral security and inadequate assessment of their ability to repay. The agency is examining whether prescribed lending safeguards were deliberately bypassed to facilitate the sanction and disbursement of the loans.

Alleged Diversion Of Loan Funds

Once the loans were disbursed, the alleged arrangement moved to the next stage — diversion of the funds. According to the ED, loan amounts allegedly were not utilised for the purposes for which they had been sanctioned. Instead, according to the ED, portions of the loan proceeds were siphoned off and used for personal purposes, withdrawn in cash or transferred through other accounts.

The ED is also probing the alleged use of loan funds for evergreening of loans, under which fresh or additional credit is allegedly used to repay existing loans, thereby masking the underlying stress or default in the earlier accounts.

Another significant aspect under investigation is the alleged transfer of loan proceeds into accounts linked to bank officials. According to the ED, such transfers are being examined as suspected kickbacks allegedly paid in return for facilitating the sanction or disbursement of loans.

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Money Trail Under Investigation

The alleged movement of funds from the bank to borrowers and subsequently to other accounts is now central to the agency’s money-laundering probe. The ED is seeking to establish the trail of the funds, identify the ultimate beneficiaries and determine the extent to which the proceeds were converted into or used as alleged proceeds of crime.

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