Overvalued properties sink Baghat Bank deeper into crisis

A majority of the properties pledged by loan defaulters in the Baghat Urban Co-operative bank are not only overvalued but they will fail to recover even a fraction of the borrowed amount even if put to auction.

One could assess the poor realizations from the fact that as against a loan default of Rs 3.49 crore, barely one lakh was recovered recently from a borrower who was first arrested and later let off as he claimed another individual had utilised the loan for liquor trade. Inquires from the excise and state taxes department, however, revealed that the said person had defaulted in crores and his properties have already been marked in red entries in the revenue records prohibiting their sale. How the bank would manage to recover its amount was, therefore, doubtful.

Severe restrictions have been imposed by the RBI, including a Rs 10,000 cap on withdrawal per customer since October 6. The over 80,000 customers were distressed with the move.

Assistant Registrar Cooperative Societies (ARCS) Girish Nadda confirmed that several assets pledged with the bank were overvalued and they will fail to recover a major chunk of the borrowing.

He added that each loan portfolio was being scrutinised and board of management responsible for sanctioning loans by overvaluing properties would be proceeded against. He said as per the norms the unrecovered amount would be recovered from the BoM who had sanctioned loans on overvalued properties. Whether such officials would be proceeded against remains to be seen as those defaulting on loans are well-connected individuals who have managed to evade re-payment for years.

The recovery continues to be abysmally poor much to the discomfort of the account holders. “As much as Rs 1.5 crore, which comprises post-dated cheques of more than Rs 50 lakh, have been deposited by the eight to nine defaulters since the recovery process was initiated by the ARCS,” informed Nadda.

Out of the Rs 137 crore NPAs loan portfolio of Rs 40 crore has been enquired into while the remaining process was underway by the ARCS.

Lack of timely corrective measures has led to this financial imbroglio. Earlier, the loaning facility was put on hold in April 2021 after the apex bank imposed a penalty owing to financial inadequacies. A sum of Rs 137 crore was stuck in NPAs and recovering it has become an Achilles heel for the bank.

As many as 499 people have availed of Rs 290 crore loans. As many as 50 individuals have to repay a whopping Rs 72 crore. Majority of these cases are fraught with procedural inadequacies where officials have cared little to adhere to the banking norms and permitted cash credit limits from branches than their home units in violation of the banking norms as per documents assessed by The Tribune.