Gigantic Bank Scam Shakes Karnataka: ED Arrests Former Chairman of Co-operative Bank in ₹63 Crore Fraud

Bengaluru, 11April 2025:  In a stunning turn to one of Karnataka’s most audacious banking scams, the Enforcement Directorate (ED) has detained RM Manjunatha Gowda, the then-chairman of the Shimoga District Co-operative Central Bank, over a mind-boggling ₹63 crore money laundering racket. The detention on April 9 shocked the cooperative banking circle and caused spontaneous outrage throughout the state.

Gowda was arrested after a massive raid organized by the ED in both Shivamogga and Bengaluru. He was then produced in a special PMLA court, which sent him to 14 days in ED custody. The arrest follows months of probe that revealed a clandestine layer of financial misrepresentation, unlawful accumulation of assets, and institutionalized fraud.

The ED’s initial findings indicate that the scam was orchestrated by the branch manager of the bank, B Shobha, on the direct instructions of Gowda. Official reports say that Shobha manipulated the internal systems of the bank to create fictitious gold loan accounts—without the knowledge or approval of actual account holders. The forged documents were used to divert funds, which were laundered and allegedly handed over to Gowda.

“This was not a lone instance of fraud but a concerted criminal conspiracy with many layers of dishonesty and abuse of finances,” said an ED official. “The scale and the complexity of the hoax are unbelievable.”

The ED claims that the money laundered by Gowda was used to accumulate enormous real estate assets and property disproportionate to his known sources of income. This is also supported by a chargesheet filed by the Karnataka Lokayukta Police, which outlines how Shobha had laundered ₹62.77 crore through shell accounts and fake transactions.

In spite of repeated efforts, both Gowda and Shobha—along with their legal counsel—have been unavailable for comment. Political circles in Karnataka, however, are rife with speculation regarding possible connections between the accused and high-placed people in the cooperative banking sector.

The case has again raised critical questions about regulation in India’s cooperative banking sector—a system which is usually beset by political interference, weak audit mechanisms, and systemic corruption. Experts are demanding stricter regulatory regimes and stronger checks to avert such frauds from being repeated.

With the ED unearthing deeper into the accounting discrepancies, additional arrests and revelations can be anticipated in the near future. It is hinted by sources that the scam might have far-reaching implications with involvement of additional senior officials and political supporters still yet to be exposed.

In a country already reeling from multiple financial scams over the past decade, the Shimoga Co-operative Bank case has reignited public anger and distrust toward financial institutions. All eyes are now on the ED as they unravel what could be one of Karnataka’s biggest banking frauds in recent memory.