JAMMU, Feb 19: The Jammu and Kashmir government on Thursday said the State Cooperative Agriculture and Rural Development (SCARD) Bank Ltd has not been declared bankrupt and that the process of its liquidation has been initiated in accordance with law due to prolonged financial and operational distress.
Replying to questions by legislators Dr Rajeev Kumar Bhagat, Vikram Randhawa, Surjeet Singh Slathia, and Vijay Kumar, Minister for Cooperatives Javid Ahmad Dar informed the house that the bank, established in 1962 under the Cooperative Societies Act, is not registered under the Banking Regulation Act and therefore does not fall under the purview of the Reserve Bank of India.
The minister said the bank is presently under the control of the union territory government through the registrar of cooperative societies (RCS) and the administrative department of cooperatives.
He reiterated that the bank has not been declared bankrupt and that liquidation proceedings have been initiated under the provisions of the Act, citing accumulated losses, weak governance and internal control systems, poor loan recovery and liquidity pressures.
Dar said that the situation worsened due to inadequate refinance support from National Bank for Agriculture and Rural Development and limited financial assistance from the government, as the bank was largely dependent on refinance and government support.
“Consequently, liabilities exceeded assets, severely impairing its ability to meet depositor obligations”, he added.
The minister said that the bank has stopped payments of matured fixed deposits, including at the Bishnah branch, due to acute liquidity constraints, leaving several depositors awaiting disbursement.
He told the house that repayment of depositors forms part of the overall liquidation and depositor-protection framework approved by the government, and that a comprehensive know your customer (KYC) verification exercise covering all branches, including Bishnah, has been completed to authenticate claims.
He said that upon issuance of the winding-up order and appointment of liquidators, duly verified claims will be settled in a phased manner strictly as per statutory provisions and the prescribed order of priority.
Dar further said the deposit insurance and credit guarantee corporation mechanism has not been invoked as it applies only to banking institutions registered under the Banking Regulation Act, adding that SCARD bank is not covered under the Act.
Reaffirming the government’s commitment to safeguarding depositor interests, the minister said a detailed projection of depositor liabilities has been compiled and submitted for consideration, including provisioning through the budgetary process in accordance with law.
