RBI’s 6-month deadline nears, recovery stagnates; valuation scam suspected
TNR Special: Part 1
Sourabh Sood
Shimla: The troubles of Baghat Urban Cooperative Bank at Solan in Himachal Pradesh continue to deepen with alleged internal mismanagement, inflated property valuations and politically driven decisions emerging as major causes behind the bank’s severe financial distress.
According to information accessed from a detailed media investigation based on research and sources, the Reserve Bank of India (RBI) has given the bank a six-month window to bring down its non-performing assets (NPA) to 6 per cent. However, recovery efforts remain sluggish and ineffective.
Mere Rs 9 crore drop in NPA in 2 months
Against a massive NPA burden of Rs 138 crore, the bank has managed to reduce the figure to merely Rs 129 crore over two months, reflecting a worrying recovery pace. Multiple loan accounts now show dues that have doubled due to compounding interest, making repayment virtually impossible for many borrowers.
The investigation reveals major lapses within the bank’s management, including two loans issued against the same property in several cases.
There are fresh loans given to borrowers to help them exit NPA status, artificially cleaning balance sheets. There are instances where the market value of attached properties is far lower than the inflated valuations done at the time of loan approval.
These discrepancies indicate possible corruption in the valuation process, with valuations allegedly done “far above actual market rates” when properties were mortgaged.
Auction fails completely: No buyers for 26 properties
A recent attempt to auction defaulting borrowers’ properties to recover Rs 17 crore has failed entirely. Despite advertisements and significant expenditure on publicity, not a single buyer participated in the e-auction of 26 properties.
The bank’s inability to sell the attached properties even in a rising real-estate market strengthens the suspicion that property valuations were manipulated, making recovery nearly impossible.
Responsibility of bank officials, evaluators and board members
There has been a demand for a thorough investigation into the entire scam to find out what role was played by various stakeholders, including evaluators who inflated property prices, bank officers who approved dubious loans and board members who sanctioned loans on political considerations.
An employee on anonymity said FIRs should be filed against those involved in fraudulent approvals and evaluations. Since several loan decisions were approved by the board, the responsibility of directors must also be examined, he said.
This entire scam also highlights that the bank’s Board of Directors is often formed on political lines, with government or registrar nominated members. This political interference, coupled with lax oversight by the RBI and Registrar of Cooperative Societies, may be contributed significantly to the bank’s decline.
