ED questions Muthoot Group MD in PMLA case after FIRs against Kochi branch managers
The Enforcement Directorate has initiated a PMLA case against Muthoot Finance branch managers, based on FIRs from Kerala Police, for allegedly misleading investors regarding fixed deposits and NCDs, and “diverting” funds to Srei Equipment Finance.
The Enforcement Directorate's Kochi unit on October 10 questioned Muthoot Group MD, George Alexander Muthoot, in an investigation related to alleged money laundering and investor fraud, PTI reported, citing official sources.
The sources added that the central investigative agency summoned George Alexander Muthoot to the ED's office in Kochi to depose, and recorded his statement in the case.
The Kochi zonal unit of the ED has filed a case under the Prevention of Money Laundering Act (PMLA), based on a number of FIRs lodged by the Kerala Police, following complaints that branch managers at Muthoot Finance mispresented investment options for customers.
ED probe into PMLA allegations at Muthoot Finance: What we know…
- According to FIRs filed by the Kochi Police, complainants alleged that the accused (branch managers of Muthoot Finance), “lured” investors into certain fixed deposits (FDs) and non-convertible debentures (NCDs) promising 8-12 per cent returns.
- They added that the accused then “diverted” the funds to a company named Srei Equipment Finance Limited.
- Sources told PTI that the accused “misrepresented” Srei Equipment Finance, as a sister concern of the group, as per the report.
- Investors said this alleged fraud led to non-repayment of funds upon maturity and claimed that they were cheated.
RBI imposes monetary penalty on Muthoot FinCorp
In an unrelated matter, the Reserve Bank of India on September 26 imposed a ₹2.7 lakh penalty on Muthoot FinCorp for non-compliance with certain norms on ‘Internal Ombudsman’, PTI said in another report.
The central bank said that this was based on the statutory inspection conducted as of March 31, 2024. The company was asked to show cause as to why a penalty should not be imposed for failure to comply with directions.
RBI said Muthoot FinCorp failed to establish a system of auto escalation of complaints that were partly or wholly rejected by the company’s internal grievance redress mechanism to its Internal Ombudsman.
The central bank, however, said that the penalty is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the company with its customers.
(With inputs from PTI)