Kangra coop bank board suspended after NABARD detects ‘irregularities’

The Board of Directors of Kangra Central Cooperative Bank (KCCB) Ltd has been suspended and the Kangra Divisional Commissioner has been appointed as its administrator to manage its affairs till a new board was elected.

Registrar, Cooperative Societies, Dorje Chhering Negi took the action after gross irregularities by the KCCB management were mentioned in the statutory inspection reports of NABARD. Negi issued show-cause notices to Kuldeep Singh Pathania, Chairman of the bank, and 19 Directors of the KCCB for alleged grave irregularities, illegalities and lapses in the management of the affairs of the bank in violation of the Reserve Bank of India (RBI) guidelines. They had been asked to submit their replies within 10 days from the receipt of the show-cause notices.

In its latest inspection report, NABARD has pointed out several irregularities, including financial deterioration to the tune of Rs 767.45 crore, resulting in the erosion of Rs 11.34 crore profit. It has also pointed out that gross NPAs at 23.45 per cent and net NPAs at 8.81 per cent as on March 31, 2024, were substantially higher than the permissible limit of five per cent.

These irregularities were detected during the period of both previous and present elected and nominated members of the board. The action has been taken under Sections 37(1)(a) and 37(6) of the HP Cooperative Societies Act, 1968. The Board of Directors have been accused of persistently disobeying the lawful directions of the RBI, NABARD and the office of the Registrar, Cooperative Societies.

The action has been taken as NABARD consistently raised objections to these irregularities that were detrimental to the interest of the present and future depositors, thereby violating Section 22(3)(b) of the Indian Banking Regulation Act. NABARD in its inspection report pointed out that the bank had persistently high NPAs at 23.45 per cent, inadequate checks and controls, continuing governance lapses and breach of exposure norms over three consecutive years, absence of qualified directors as mandated, repeated failure in fraud prevention and reporting and pendency of unreconciled entries.

There are also allegations of unauthorised lending, as 1,090 loans accounts have been sanctioned outside the notified area of operation and 80 per cent of which are NPAs contrary to the RBI licence conditions and the bank bylaws. Other allegations include failure to transfer inoperative Recurring Deposit accounts lying for more than 10 years to the RBI DEA Fund in non-compliance with Section 26A of the Banking Regulation Act. Weak control and fraud management, operational lapses, system and service deficiencies and governance failure.