The crisis engulfing the Jammu and Kashmir State Cooperative Agriculture and Rural Development (SCARD) Bank is yet another grim reminder of how mismanagement, inefficiency, and official apathy can ruin a financial institution and shatter the lives of common people. Those who trusted the bank with their meagre life savings are today running from pillar to post for their own money. Their plight is heartbreaking: families unable to pay medical bills, perform marriages, or rebuild homes damaged in floods, while the institution that took their deposits pleads helplessness. With around 15,000 depositors and liabilities exceeding Rs 165 crore, the SCARD Bank has virtually gone bankrupt. Fixed Deposits and Recurring Deposits maturing remain unpaid, and depositors have been left in limbo, told vaguely that audit inspections are “under process” and that reports from NABARD and the Registrar of Cooperative Societies will take time. Such vague assurances cannot hide the reality: the bank’s capital base has been eroded due to reckless lending and questionable investments.
What makes the crisis more serious is the fact that SCARD Bank is not under the regulatory ambit of the Reserve Bank of India. This means depositors cannot even fall back on the safety net of deposit insurance up to Rs 5 lakh. The Cooperative Department of the UT has clearly failed to oversee such institutions in its supervisory role. The UT Government allowed the bank to operate 24 branches, collect deposits from innocent villagers, and function as a quasi-banking entity without the necessary checks and balances.
The history of the bank makes this tragedy even more painful. Established in 1962 as the Central Land Development Bank, SCARD was meant to provide long-term and medium-term loans to farmers for land development, farm mechanisation, dairy, horticulture, and allied activities. Later, in 1989, at the height of terrorism, the bank was permitted to diversify into deposit-taking activities, thus entering the domain of commercial banking. Yet, despite multiple spells of popular Governments and Governors’ rule with routine audits, no red flag was ever raised about its deteriorating health. This raises a serious question: how could the entire capital of the bank get wiped out suddenly without warning? The only logical explanation is years of ignored audit reports, deliberate leniency in loan recoveries, and inefficiency bordering on complicity. Loans are always advanced against some form of guarantee or collateral. That SCARD is unable to recover its dues speaks of either systemic inefficiency or deliberate favouritism in lending.
At this stage, the Government cannot shirk its responsibility. Having allowed the bank to function and attract deposits, it owes a duty to safeguard the money of poor depositors. Rs 160-165 crore may not be a large sum for the Government, but for rural families who invested their life savings, the hardship is unimaginable. Immediate steps must be taken to provide interim relief. This should include identifying and recovering dues from defaulters by attaching their assets and bank accounts, and infusing emergency capital support to prevent total collapse and restore public confidence. Fix the accountability by identifying officials who sanctioned loans without due diligence and engaging professional management, possibly with assistance from J&K Bank, to evaluate the financial status and decide whether SCARD should continue as a bank. There is little point in running a financial institution outside RBI’s legal and regulatory framework, and a merger or closure may be a better option once depositors are safeguarded.
This crisis should also be a wake-up call to examine other cooperative and semi-banking institutions functioning under various Government departments. At its core, banking is not everyone’s cup of tea. It demands professional expertise, technological modernisation, transparent governance, and above all, independent regulatory oversight. Complete computerisation and real-time inspections by RBI are non-negotiable for any deposit-taking institution. Continuing with makeshift arrangements under a Cooperative Department is a recipe for disaster. If the hard-earned money of villagers, farmers, and pensioners is not safe even in a bank sanctioned by the Government, what confidence can they have in the system? The government must act decisively-protect depositors, punish the guilty, and reform the system.
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