J&K Govt confirms ₹223 Cr loan fraud led to cooperative bank losses

Srinagar, Apr 09: The Jammu and Kashmir Government Wednesday acknowledged that the J&K State Cooperative Bank has been grappling with heavy financial losses since 2019–20, largely due to a ₹223 crore loan turning into a non-performing asset and later being declared fraudulent.
The revelations came to fore in a detailed written reply to a question submitted by MLA Ali Mohammad Dar in the Legislative Assembly, shedding light on financial irregularities, administrative reshuffles, and employee grievances within the bank.
The Culture Department’s reply, submitted by the concerned administrative authority, revealed that a loan amounting to ₹223 crore was sanctioned to the River Jhelum Cooperative House Building Society during the tenure of the elected board in 2019.
“The loan, mortgaged against 257 kanals and 19 marlas of land in Shivpora, Srinagar, was later declared a fraud based on the Audit Committee’s recommendations, compelling the bank to make 100% provisioning — a move that significantly impacted its financial standing.”
Responding to a query regarding the current governance of the bank, the government confirmed that the elected board was superseded in 2020 through a government order and replaced by a nominated board headed by the Divisional Commissioner.
However, the nominated board’s tenure ended in October 2022 following a High Court directive. Although a new board was constituted in January 2023, it was later quashed by the Hon’ble High Court in April the same year. An appeal filed by the government against this order was also dismissed in July 2024.
“As of now, the bank is functioning without a board in place. The charge of Acting Managing Director has been assigned to the Additional Commissioner, Kashmir, from the office of Divisional Commissioner Kashmir, on an ad-interim basis,” the reply stated.
On the matter of recovery of the defaulted loan, the government clarified that while the bank served notices to the cooperative society for repayment, it could not proceed under the SARFAESI Act because the mortgaged land stands attached by the District Magistrate.
“The attachment was based on alleged violations of multiple legislations including the J&K Migrant Immovable Property Act, the Benami Transactions (Prohibitions) Amendment Act, 2016, and the Prevention of Money Laundering Act (PMLA), 2002.”
Further complicating matters, the Enforcement Directorate provisionally attached the land under the PMLA on December 14, 2023. This attachment was confirmed by the Adjudicating Authority on May 14, 2024. An appeal against the attachment has since been filed by the Bank before the Appellate Tribunal in New Delhi.
In response to the final query raised by MLA Dar, the government acknowledged that the bank employees have not received Dearness Allowance (DA) or increments for the last four years. “These can be released after due approvals from the competent authority,” the reply said.