Port Blair: The Enforcement Directorate (ED) on Wednesday arrested former Andaman and Nicobar Islands Member of Parliament Kuldeep Rai Sharma and two senior officials of the Andaman and Nicobar State Cooperative Bank (ANSCBL) in connection with an alleged bank fraud case worth over ₹500 crore. This marks the first-ever arrest by the ED in the Union Territory.
Arrests and custody
The ED’s Kolkata Zonal Office confirmed the arrests of Sharma, who also served as the former Chairman of ANSCBL, along with K Murugan, the bank’s Managing Director, and K Kalaivanan, its Loan Officer. The arrests were made under the provisions of the Prevention of Money Laundering Act (PMLA), 2002.
Following the arrests, a special PMLA court remanded Sharma and Kalaivanan to ED custody for eight days. Murugan’s custody status is still under judicial consideration.
The case background
The investigation stems from a First Information Report (FIR) registered by the Crime and Economic Offences Cell of the Andaman and Nicobar Police. The FIR accused Sharma and his associates of sanctioning loans through fraudulent means, causing massive financial losses to the cooperative bank.
According to ED, Sharma and his associates floated numerous shell companies and sanctioned loans to them in blatant violation of banking procedures. The sanctioned funds were allegedly siphoned off, creating substantial non-performing assets (NPAs).
Scale of the fraud
ED officials stated that their investigation revealed loans worth more than ₹500 crore were processed through over 100 loan accounts linked to Sharma and his network. Of this, ₹230 crore was allegedly taken exclusively for Sharma and his close associates.
The agency added that Murugan and Kalaivanan also fraudulently availed loans using companies in the names of their relatives. They allegedly facilitated multiple loans in exchange for a 5 per cent commission, often collected in cash or routed through shell company accounts.
Earlier searches and findings
This arrest follows ED searches conducted on July 31 and August 1 at 21 premises, including properties linked to Sharma and shell companies created under his instructions. Investigators said funds were systematically diverted and withdrawn in cash, with significant portions allegedly shared with senior bank officials, including Sharma.
The agency confirmed that further searches are currently underway at three locations in the Andaman and Nicobar Islands to trace diverted funds and assets.
First-ever ED arrests in the islands
ED highlighted that this is the first time the federal agency has arrested individuals in connection with financial crimes in the Andaman and Nicobar Islands. The development signals a strong move against organised financial misconduct in cooperative banking systems.
What lies ahead
The arrests have stirred political and public attention in the Union Territory, given Sharma’s past as an MP and his influential role in the region. The ED is expected to file a detailed charge sheet after completing its ongoing investigation into the fraudulent loan network.
The case has also sparked broader concerns about the misuse of cooperative banking systems in India, with the ED pointing out systemic lapses that allowed the fraud to persist over time.