Probe uncovers deep-rooted lending lapses at Baghat bank

The lending practices of the Baghat Urban Cooperative Bank have come under sharp scrutiny after a fact-finding inquiry by the Assistant Registrar, Cooperative Societies (ARCS), exposed serious irregularities across multiple loan portfolios. The inquiry, launched to assess the bank’s ballooning non-performing assets (NPAs), has so far revealed glaring breaches of protocol, questionable decision-making and patterns of evergreening that kept bad loans hidden for years.

According to the ARCS, of the Rs 130 crore in NPA-linked loans under examination, nearly Rs 40 crore involves direct evergreening — fresh loans extended to borrowers who were already struggling, purely to prevent their accounts from being classified as NPAs.

In several other cases, loan limits were enhanced on the strength of a simple application approved by the Managing Director, without the mandatory collateral or guarantee checks. Officials say such practices have inflicted severe financial damage on the bank and raise troubling questions about successive administrations since 2008–09.

One case that has particularly alarmed investigators involves a borrower from Shimla district who pledged revenue papers of government land leased to him. Despite the land being state-owned, the bank sanctioned a loan of Rs 1.68 crore in 2018, later turning NPA and swelling to Rs 2.5 crore. The same borrower also secured another loan of Rs 1.35 crore against his own property, which too slipped into default with dues now at Rs 1.68 crore. Both loans, meant for business purposes, contributed significantly to the bank’s NPA pile, which currently stands at a staggering Rs 129 crore.

Managing Director Rajkumar confirmed the anomalies, remarking that it was “surprising” that the revenue papers were submitted by the government and that the land had already been mutated in the bank’s favour. “Had it not been mutated, we would have refused the loan,” he said, acknowledging the questionable nature of the approval.

The ARCS has so far scrutinised loan accounts totalling Rs 55 crore, and officials say the role of managers, senior leadership and the board is under close examination. ARCS Girish Nadda said once the entire Rs 130-crore portfolio is reviewed, a comprehensive report will be submitted to the Registrar for further action. He added that FIRs may be recommended against officials found responsible for the lapses. The inquiry is expected to conclude within a fortnight.