Jammu and Kashmir Government Addresses SCARD Bank's Liquidation Process

The Jammu and Kashmir government clarified that SCARD Bank, not under the Banking Regulation Act, is undergoing liquidation due to financial distress, not bankruptcy. Challenges include reduced refinancing support and liquidity issues. A phased repayment plan for depositors is underway, pending a government-approved liquidation framework.

The Jammu and Kashmir government announced on Thursday that the State Cooperative Agriculture and Rural Development (SCARD) Bank Ltd is not bankrupt but is facing liquidation due to severe financial and operational distress. The clarification came in response to queries raised by lawmakers including Dr. Rajeev Kumar Bhagat and Vikram Randhawa. Minister for Cooperatives Javid Ahmad Dar emphasized that while the bank struggles financially, it has not officially been declared insolvent.

Minister Dar explained that the SCARD Bank, founded in 1962 under the Cooperative Societies Act, isn't registered under the Banking Regulation Act and thus does not fall under the Reserve Bank of India's jurisdiction. Currently, the bank is managed by Jammu and Kashmir's union territory government through the registrar of cooperative societies (RCS). Initiation of liquidation is propelled by internal control failures and cumulative financial losses.

The bank's cash flow problems were exacerbated by minimal refinance support from the National Bank for Agriculture and Rural Development and constrained government aid, resulting in liabilities surpassing assets. This left the bank incapable of fulfilling depositor obligations, causing payment halts for matured fixed deposits. An extensive KYC verification is completed, with liquidation proceedings set to ensure depositor claims are settled in compliance with the law.

(With inputs from agencies.)