Bhavnagar | A suspected ₹1.35 crore loan scam under the Prime Minister’s Employment Generation Programme (PMEGP) has raised serious concerns over banking oversight and monitoring of government subsidy schemes in Gujarat’s Bhavnagar district. Police have arrested Santosh Kumar, the Chief Manager of a branch of the State Bank of India (SBI), over allegations that loans were sanctioned on the basis of forged documents and without following mandatory banking procedures.
The case came to light following a complaint registered on March 31 regarding major irregularities in loans disbursed under the PMEGP scheme. During the investigation, authorities allegedly discovered that several loans had been approved without proper verification and were supported by fake, incomplete, or manipulated documentation.
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The PMEGP scheme was introduced to provide financial assistance to small entrepreneurs and unemployed individuals for self-employment and business development. However, investigators believe that in this case the scheme was misused to obtain illegal financial benefits through fraudulent means.
According to the investigation, mandatory verification procedures at the branch level were allegedly ignored, and in several instances loans were sanctioned without thoroughly examining the required documents. Authorities suspect that certain agents and beneficiaries played a crucial role in the process by preparing forged applications and facilitating their submission to the bank.
So far, police have arrested four women beneficiaries and two agents in connection with the case. During interrogation, the name of the bank’s Chief Manager reportedly surfaced, prompting investigators to intensify the probe into his alleged involvement.
Officials stated that preliminary evidence indicates that banking standards and internal compliance procedures were bypassed in a planned manner to approve the loans. Following the emergence of these findings, the accused bank officer was taken into custody and formally arrested.
Investigators are now examining whether other bank employees or officials were also involved in the alleged scam. Agencies are trying to determine the full scale of the fraud, the number of beneficiaries who may have gained from it, and whether the irregularities extended beyond a single branch.
The exposure of the scam has triggered serious questions regarding monitoring mechanisms in banks and implementation oversight in government-backed financial schemes. Experts believe that stricter verification and stronger auditing systems could have prevented such irregularities.
Economic crime analysts note that subsidy-linked government schemes often become vulnerable to misuse due to the involvement of local agent networks and internal collusion. Preliminary findings in this case are also reportedly pointing in a similar direction.
Investigating agencies have clarified that the probe is still underway and efforts are being made to uncover the complete network behind the alleged fraud. Authorities are also examining whether the scam has links to other districts, financial institutions, or additional beneficiaries.
Following the revelations, vigilance within the banking sector has reportedly been increased, and branches handling government-sponsored loan schemes have been directed to review and strengthen their verification processes.
Local authorities stated that strict action would be taken against all those found responsible and that negligence at any level would not be tolerated.
The case has once again highlighted how weak oversight mechanisms and lapses in verification procedures can turn welfare-oriented government schemes into channels for financial fraud and organized economic crime.
