A major financial irregularity has been uncovered at the Primary Agricultural Cooperative Credit Society in Aralvaimozhy, Kanniyakumari district, where investigators have exposed a ₹2.65 crore gold loan scam involving alleged use of fake jewellery as collateral. The Economic Offences Wing (EOW) has arrested one individual in connection with the case, while six others remain absconding.
According to police officials, the arrested accused has been identified as Muthu Krishnan, who was working as a clerk at the cooperative society. He was taken into custody on Tuesday. The case also names former secretary X. Sahaya Thilagaraj, along with several others, who are suspected of playing key roles in the fraudulent loan disbursement process and manipulation of financial records.
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Investigators say the scam was systematically carried out over a period of six years, between 2017 and 2023. During this time, fake or imitation jewellery was allegedly pledged as genuine gold in order to obtain loans amounting to approximately ₹2.65 crore. Preliminary findings suggest that several loans were sanctioned without proper verification, pointing to serious lapses in internal auditing and possible collusion within the institution.
The case came to light following a complaint filed by a retired Deputy Registrar of Cooperative Societies, which triggered a detailed audit of the institution’s records. The audit report revealed multiple suspicious transactions and inconsistencies in loan documentation, prompting authorities to escalate the matter to the Economic Offences Wing. A formal criminal case was subsequently registered, and a full-scale investigation was launched.
Police sources indicate that the scam may involve a wider network beyond just a few individuals. The investigation is exploring the possibility that bank staff, former officials, and external facilitators may have worked together to execute the fraudulent loan approvals. Authorities are also examining how the fake jewellery was sourced and who certified its authenticity during loan processing.
One of the most concerning aspects of the case, according to officials, is the apparent failure of the cooperative banking system’s internal control mechanisms. Investigators have found repeated use of similar ornaments across multiple loan files and suspected manipulation in valuation reports. These patterns suggest the possibility of a coordinated financial fraud operation rather than isolated incidents of misconduct.
The EOW has begun intensive questioning of the arrested clerk, Muthu Krishnan, and is analyzing his financial records, digital devices, and transaction history. At the same time, multiple teams have been deployed to trace the remaining accused who are currently absconding. Officials have indicated that further arrests are likely as the investigation progresses.
Authorities believe that as the probe deepens, more individuals involved in the scam will be identified. Early indications suggest that the case may not be confined to a single cooperative society, but could be part of a broader pattern of systemic financial fraud involving banking irregularities and weak oversight mechanisms.
The case has raised serious concerns over the functioning of cooperative financial institutions in the region, highlighting vulnerabilities in loan verification processes and asset valuation systems. Investigators are currently reviewing all loan files, financial records, and administrative approvals to reconstruct the full extent of the alleged scam.
The investigation is ongoing.
