Probes on J&K Bank raise concerns over state's financial activities

With the Jammu and Kashmir state Anti Corruption Bureau (ACB) unearthing another insurance fraud at J&K Bank — the prestigious lender known for keeping banking alive in restive Kashmir for decades — the fate of financial activities in the state hangs in balance.

The fraud pertains to an insurance deal struck by the J&K Bank with IFFCO Tokio, a joint venture between the Indian Farmers Fertilizer Co-operative (IFFCO) and Japan’s Tokio Marine Group.

The ACB stated that the insurance deal was “in violation of norms” as Asif Manzoor Beig, a close relative of former chairman of J&K Bank Parvez Ahmed Nengroo, was employed in IFFCO Tokio, resulting in undue benefits to the said company. Nengroo is said to have abused his official position by appointing Beig in IFFCO Tokio against an annual salary package of ₹19,28,886, which was approximately 2.5 times higher than his earlier package as deputy manager at Bajaj Allianz General Insurance Company.

This is not the first case of corruption that has come up involving the J&K Bank. After Nengroo was removed as the chairman on June 8 following allegations, including financial irregularities and loan fraud worth crores of rupees, the state started investigations against a web of operations surrounding the bank. Since then, skeletons have been tumbling out.

Also read: J&K Governor Satya Pal Malik regrets ‘kill the corrupt’ remark

On June 28, Business Line reported that the anti corruption body exposed a loan fraud worth ₹177 crore at J&K Bank. On June 27, the Income Tax Department said that a prominent business group in Srinagar was given illegal tax benefit of ₹60 crore by the bank. The ACB last month also claimed to have uncovered a racket in which loans to the tune of ₹1,000 crore were diverted.

On July 6, The Print reported that the National Investigation Agency (NIA) may start probing the bank’s alleged role in a terror-funding case. The NIA had alleged that the bank did not follow any Know Your Customer (KYC) norms, or link the accounts to respective PANs (Permanent Account Numbers). Even the phone numbers or proper address proofs used to open certain accounts were missing from the bank records.

However, the insurance deal with IFFCO Tokio is the latest case of Nengroo’s abuse of official position, and the anti-corruption body has registered a case against him for ‘criminal misconduct’ under the J&K Prevention of Corruption Act 2006.

The ACB investigation revealed that the J&K Bank had entered into deals with PNB Metflife Insurance company for sale of its insurance products in 2000 and with Bajaj Allianz Insurance Company for sale of its non-life insurance products in 2002. It said in a statement that the said insurance deal gave IFFCO Tokio the insurance business in Srinagar and Anantnag at the cost of J&K Bank resources and that of Bajaj Allianz company.

The initial probe found that J&K Bank received commissions from Bajaj Allianz and IFFCO Tokio to the tune of ₹159 lakh and ₹88 lakh in the first quarter of the financial year 2018-2019.

Also read: Railway Ministry studying profiles of officials under anti-corruption drive: Goyal

On July 22, the ACB also searched the offices of IFFCO Tokio at Chinar Complex, Residency Road in Srinagar to seize incriminatory evidence related to the commission of the offence by the officials of IFFCO Tokio.

Taking cognisance of the unstable situation of the bank, the Reserve Bank of India (RBI) on July 5 appointed its ex-Executive Director AK Misra as an Additional Director on the Board of Directors (BOD) of the bank.

Skeletons tumbling out of the J&K Bank raises concerns about the financial state of the state as the bank spearheads all economic and financial activities in Jammu and Kashmir. The bank has 940 branches across India with 812 in the state alone. A majority of these branches (504) are in rural areas. As of 2017-18, the aggregate business of the bank stood at ₹1.4 lakh crore, with a growth of 10.41 per cent.

On an average, one bank branch is available per 6,185 residents of the state, according to the 2017 economic survey conducted by the state government. J&K Bank is the only public sector bank (PSB) in India where the state government holds a majority stake.

Founded in October 1938, J&K Bank over the years has become a part of people in the Valley. As the last resort of financial assistance for people, the bank is known for going a step ahead in making an impact in people’s lives. For instance, the bank runs a ‘Debt Swap Scheme for Farmers, where it provides finance to farmers to repay their outstanding dues to moneylenders. “There is no other bank in the country that provides such a service,” Dr Javaid Iqbal Khan, a senior assistant professor at Kashmir University’s Department of Economics is quoted as saying in The Print.

Such actions over the years have brought the bank closer to the people in the state. But now, with various probes against the bank, chances of more such skeletons tumbling out of the bank’s closet remain high, blurring the future of financial activity in the state.