Enforcement Directorate seeks records of Kangra bank’s loan waiver scheme, BJP alleges Cong leaders favoured

The Enforcement Directorate (ED) has sought the records of loan waivers granted under the One-Time Settlement (OTS) scheme of Kangra Central Cooperative (KCC) Bank Limited. It has initiated a preliminary inquiry into an alleged financial fraud in the bank.

The inquiry comes after the Himachal Pradesh Government suspended the entire 20-member Board of Directors of the bank on September 12 following a National Bank for Agriculture and Rural Development (NABARD) report highlighting financial irregularities and governance failure.

The NABARD inspection report, dated March 31, 2024, and submitted to the state government on March 27, 2025, pointed out asset erosion to the tune of Rs 767.45 crore, provisioning shortfalls of Rs 11.34 crore and a sharp rise in bad loans. The bank’s gross non-performing assets (NPAs) stood at 23.45 per cent and net NPAs at 8.81 per cent, well above the permissible limit of 5 per cent.

The report also cited unauthorised lending -- 1,090 loans were sanctioned outside the bank’s operational area and 80 per cent of these became NPAs. The NABARD report also flagged lapses in the Know Your Customer (KYC) and anti-money laundering protocols, misclassification of loans, delays in fraud reporting and operational failures that led to the rejection of Rs 22.30 crore in government subvention claims.

Some fresh frauds to the tune of Rs 8.64 crore were also detected during inspection while 241 earlier fraud cases involving Rs 20.99 crore were still pending.

Under the OTS scheme, the bank settled 5,461 NPA cases involving Rs 198.37 crore loans. Of this, Rs 185.38 crore was waived while borrowers repaid Rs 112.12 crore. In 4,420 cases that were fully closed, loan waivers amounted to Rs 122.15 crore.

The Board of Directors had taken back some bank employees, who had earlier been dismissed for negligence, raising questions about management decisions.

BJP spokespersons Sanjay Sharma and Vishav Chakshu have alleged that the bank management had favoured Congress leaders by waiving their loans under the OTS scheme. They claimed that several incumbent and former MLAs belonging to the Congress had benefited from the settlement process, which amounted to corruption, they alleged.

As the ED is examining loan waivers, political observers believe that the investigation can have wider implications in the hill state, potentially bringing Congress leaders and some bureaucrats under scrutiny.

Gross NPAs 23.45 per cent

• The NABARD inspection report, dated March 31, 2024, and submitted to the state government on March 27, 2025, pointed out asset erosion to the tune of Rs 767.45 crore, provisioning shortfalls of Rs 11.34 crore and a sharp rise in bad loans
• The bank’s gross NPAs stood at 23.45 per cent and net NPAs at 8.81 per cent, well above the permissible limit of 5 per cent
• 1,090 loans were sanctioned outside the bank’s operational area and 80 per cent of these became NPAs