SRINAGAR: The Jammu and Kashmir government on Wednesday informed the Assembly that the JK State Cooperative Agriculture and Rural Development Bank (JK SCARD Bank) has not been declared bankrupt, but liquidation proceedings have been initiated due to prolonged financial and operational distress.
Replying to clubbed starred Assembly questions by MLAs Rajeev Kumar Bhagat, Vikram Randhawa, Sudeet Singh Slathia and Vijay Kumar, the Cooperative Department stated that the bank’s financial stress has been “gradual and multifactorial”.
The department said the bank, established in 1962 under the JK Cooperative Societies Act, 1960, is not registered under the Banking Regulation Act, 1949, and therefore does not fall under the regulatory purview of the Reserve Bank of India. It is presently under the control of the Union Territory government through the Registrar Cooperative Societies (RCS) and the Administrative Department of Cooperatives.
The government said that due to accumulated losses, weak governance and internal control systems, sub-optimal loan recovery, liquidity pressures, and the non-availability of adequate refinance support from National Bank for Agriculture and Rural Development (NABARD) and financial assistance from the UT government, the bank’s financial position deteriorated over time.
“As a consequence of these factors, the liabilities of the Bank exceeded its assets, adversely impacting its ability to meet depositor obligations,” the reply stated, adding that liquidation proceedings were initiated in accordance with the provisions of the Jammu and Kashmir Cooperative Societies Act and the rules framed thereunder in the larger public interest and to protect stakeholders.
The government also confirmed that the bank has stopped payment of matured fixed deposits across its branches, including the Bishnah branch, due to acute liquidity constraints. Amounts payable to several depositors, including senior citizens and farmers, remain pending.
The department said that repayment to depositors forms part of the overall liquidation and depositor-protection framework approved by the government. A comprehensive Know Your Customer (KYC) verification exercise covering all branches, including Bishnah constituency, has been completed to authenticate depositor claims.
It further stated that upon issuance of the winding-up order and appointment of liquidator(s), duly authenticated claims will be taken up for settlement and phased disbursement strictly in accordance with the provisions of the Jammu and Kashmir Cooperative Societies Act, 1989, and the statutory order of priority.
Responding to a separate query, the government clarified that the Deposit Insurance and Credit Guarantee Corporation (DICGC) mechanism has not been invoked in respect of the bank. It said that DICGC coverage applies only to eligible banking institutions covered under the Banking Regulation Act, 1949.
Since JK SCARD Bank is not registered under the Banking Regulation Act, it does not fall within the purview of the Deposit Insurance and Credit Guarantee Corporation.
However, the government said it remains committed to safeguarding the interests of depositors. A projection of the bank’s depositor liabilities has been compiled and submitted to the government for consideration, including appropriate provisioning through the budgetary process in accordance with law.
