Bhubaneswar, Jan. 13: Officials of the crime branch's economic offences wing today arrested a senior OAS officer and two bank officials in connection with financial irregularities of Rs 18 crore at the Urban Co-Operative Bank.

The police said the accused had given the money as loan to their relatives on the basis of forged documents.

The arrested persons are OAS officer Bharat Bhusan Jagadev and bank officials Udayanath Sahu and Santanu Kumar Mohanty. Jagadev and Mohanty were posted as the secretaries of the bank's Bhubaneswar branch, while Sahu was a former manager of the bank's Old Town branch. At present, Jagadev is posted as deputy secretary in public enterprises department.

Additional director-general of police (crime branch) B.K. Sharma said the irregularities came to the bank's notice during an internal audit. "While probing, we found that the accused had sanctioned loans in the names of their relatives on the basis of forged documents. In some instances, the accused trio have shown the value of the land kept as security as three times their original price," said Sharma.

The police have registered two cases in this connection. They will find out if officials of other branches of the bank were also involved in such fraud. "We will grill other bank officials and customers, who have availed themselves of loans. We are suspecting involvement of other bank employees in the scam as well," said Sharma.

The fraud had taken place during 2002 and 2014.

The Reserve Bank of India had granted licence to the Urban Co-Operative Bank in September 1987 for banking business, and the bank has a customer base of around 14,000. However in March 2014, the RBI had to cancel the bank's licence because of its deteriorating financial health. Sources said the bank had been making profit till 2001 but gradually started to sink from 2002-03 because of non-collection of loans.

An official in the state co-operation department said the bank had deposits of Rs 28 crore, while it needed to recover nearly Rs 39 crore from those, who had been granted loans. "Of this, Rs 19 crore is the principal amount, while the remaining is interest," said the official.

In 2002-03, the vigilance department, which was probing reasons behind the bank's ill financial health, had arrested two bank employees, including Jagadev, for allegedly disbursing huge loans to the people by accepting forged documents. Two other bank employees had also been suspended for the same reason in 2004. The vigilance department had also arrested four businessmen for availing themselves of loan of around Rs 4 crore from the bank in a fraudulent manner in 2010.