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RBI official arrested in Bengaluru for alleged role in banned notes exchange

black money crackdown Updated: Dec 13, 2016 15:44 IST

A bank officer shows new Rs 2000 notes(PTI Photo)

A senior special assistant of the Reserve Bank of India has been arrested by the Central Bureau of Investigation in Bengaluru for his alleged involvement in currency exchange.

“K Michael, a senior special assistant in the Issue Department of RBI’s regional office, has been arrested for his alleged involvement in conversion of old Rs 500 and Rs 1,000 notes worth Rs 6 lakh into Rs 100 notes at the State Bank of Mysore’s (SBM) Kollegal branch in Chamrajpet district,” a CBI official told IANS on condition of anonymity.

Kollegal is 145 km from Bengaluru in Karnataka’s southwest region.

Michael’s arrest comes a week after the CBI on December 6 registered a case against the bank branch’s senior cashier Parashivamurthy for allegedly laundering Rs 1.51 crore of new currency in exchange for old currency after the government demonetised those on November 8.

“As the Kollegal branch is SBM’s currency chest, large amounts of new notes in Rs 2,000 and Rs 500 were kept with lower-value notes for distribution to the bank’s branches and state treasury offices in the district,” pointed out the official.

Michael’s name figured when CBI sleuths interrogated Parashivamurthy in the money laundering case.

“Coincidentally, Michael was at Kollegal on the day of demonetisation (November 8) to refill the currency chest with fresh stock and helped the bank’s cashier convert the old notes for Rs 100 notes without proper documentation,” said the official.

A special court remanded Michael to six-day CBI custody for interrogation.

The Enforcement Directorate (ED) earlier arrested seven alleged middlemen and seized Rs 93 lakh in new currency in Karnataka, unearthing a racket involved in illegal conversion of demonetised notes.

Officials said the agency placed the seven, including the relative of a government official, under arrest late on Monday under provisions of the Prevention of Money Laundering Act (PMLA).

Read: Supreme Court questions Centre about demonetisation, asks about secrecy

Officials said the action was taken as part of a probe in a case where the Income Tax department had recently seized Rs 5.7 crore cash in new currency and the Enforcement Directorate had booked a money laundering case against a government engineer and others based on a CBI FIR in the case.

The modus operandi adopted by the alleged middlemen, officials said, was unearthed after ED officials launched a special operation and themselves posed as ‘customers’ looking to get old currency changed illegally, after paying commission to the said middlemen.

Officials said the probe by the agency found that these alleged middlemen were reportedly charging a commission between 15-35% and were executing the racket of illegal conversion of new notes in alleged connivance with bank officials.

They said the agency suspects that there is a chain of middlemen involved in converting black funds into white even as they added that the probe in continuing.

The accused are expected to be produced in a local court in Bengaluru for further custody.

India after demonetisation: Full coverage