We fairly know that the functioning of the Cooperative Banks in Jammu and Kashmir has been far from satisfactory where besides absence of reasonable levels of professionalism and strict audits and inspections, integrity of some personnel even up to top management level has been found doubtful. It is again a matter of interest as to why such functioning was allowed to reach explosive situations like perpetrating a loan scam of Rs.223 crore last year suggesting flaws in internal working where usual checks and balances were grossly insufficient. Agreed, the law was going to take its course and punish those who committed such acts but in the short run, the overall functioning of the Banks was going to get vastly affected. It may be noted that the biggest asset a Bank is in possession of, is the public trust which gets completely shaken due to frauds, scams and malfunctioning. The bane of all the factors leading to adopting ways of departures from basic tenets of Banking is, again, complete absence of professionalism.
To address this basic problem, Union Ministry of Home Affairs has decided to have strictly implemented the packages sanctioned by the Central Government or the UT Government of Jammu and Kashmir through Professional Boards. This has been made possible by inserting new provisions in the Jammu and Kashmir Cooperative Societies Act 1989. Through such measures, revival of ailing Cooperative Banks is pointedly aimed at. It was surely going to ensure better governance of these Banks. Needless to add, the Government of India has already, three months back, brought all Urban and multi state cooperative Banks under the direct supervision of Reserve Bank of India (RBI) by making changes in the Banking Regulation Act. The J&K (state) Cooperative Bank and other Cooperative Banks, thus, come under the supervision of the RBI. In the absence of such a supervision, safety of depositors and satisfactory repayment of loans used to be left to mere chances.
Earlier, there used to be no provision for constitution of Professional Boards and its absence was leading mostly to poor, faulty, unprofessional, non transparent and risky banking in these Cooperative Banks in Jammu and Kashmir . The absence of reporting of any type of developments with far reaching consequences vis-a-vis normal and healthy banking, used mostly to be not prompt. By incorporating new sections in the J&K Cooperative Societies Act, Government can constitute such Professional Boards for managing the affairs of Central Cooperative Banks including Anantnag, Baramulla and Jammu Central Cooperative Bank Ltd. The mandate of the Professional Boards shall be implementing the revival packages sanctioned from time to time by the Central Government or the UT Government of Jammu and Kashmir. Not only will it result in strengthening their capital base but also lead to maintaining the required Capital Risk Adequacy Ratio (CRAR). In other words, it means higher the CRAR, the higher is protection available to the depositors of the Bank.
It may be noted that CRAR is a yardstick to know how much capital is available with a bank as compared to bank’s risk weighed credit or advances exposure. Therefore, from the date of constitution of such Professional Boards, the existing Board of Directors of the concerned banks shall cease to exist. In simpler parlance, it will be the Professional Boards which will run these banks for a minimum period of two years or a period specified by the Government from time to time. Should the revival package heal the ailment of these banks within a specified period, the entire gamut can thereafter be reviewed . The Government or the Professional Boards will be appointing Managing Directors or such officers of these banks as may be determined by the Government. In short, a revamp of management on professional and transparent lines of Cooperative Banks in Jammu and Kashmir being on the anvil induces assured hope of running of these banks in a professional manner in addition to their coming out of the financial crisis.
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