Srinagar, Sep 23 The Comptroller and Auditor General (CAG) report on the performance of J&K Bank released on Wednesday, indicts the bank for the failure of its credit control and financial reporting system.
The CAG performance audit of J&K Bank says, "The bank was incorporated with the objective to establish and carry on business of a banking company; borrow or raise money; to lend money by making loans and advances; to buy, sell, collect and deal in bills of exchange, hundies, promissory notes, drafts, bills of lading, debentures and other instruments; to deal in stocks, shares, debentures, securities and investment of all kinds; to buy and sell foreign exchange including foreign notes; and to act as agents for Government or local authorities."
The bank had not complied with the SEBI regulations and some of the provisions of Companies Act, 2013 relating to corporate governance.
"Profit earned by the bank declined from Rs 1,182.47 crore during 2013-14 to Rs 202.72 crore in 2017-18, mainly due to increase in the gross Non-Performing Assets (NPAs) of the bank from Rs 643.77 crore, as on 31 March 2013 to Rs 6,006.70 crore, as on 31 March 2018. Percentage of NPAs to Gross Advances also increased from 1.62 per cent at the end of March 2013 to 9.96 per cent at the end of March 2018. The bank also suffered a loss of Rs 1,632.29 crore during 2016-17.
"The bank's credit control system and financial reporting system failed to identify NPAs in time. Although there had been 24.58 per cent growth in deposits during 2013-14 to 2017-18, annual growth of deposits of the bank during last four years ending March 2017 was far below overall national average of Scheduled Commercial Banks."
"The Bank had recorded an increase of 51.30 per cent in advances during 2013-14 to 2017-18, annual growth fluctuated between (-) 1.78 per cent and 18.28 per cent. "Percentage of unsecured advances to total net advances had increased from 20.16 per cent at the end of March 2014 to 27.90 per cent at the end of March 2018.
"The bank concentration risk for industry-wise exposure was on higher side when compared to average of overall banking industry.
"Sanction/release of credit facilities, without safeguarding the bank's interest through adequate security cover, proper credit appraisal, adherence to the pre or post-disbursement conditions of the sanctions, regular monitoring, etc not only led to NPAs but also loss/non-recovery of Rs 197.98 crore, doubtful recovery of Rs 1,599.14 crore and excess payment of Rs 14.10 crore in test-checked cases.
"Deficiencies were noticed in Information Technology systems of the bank due to which it could not ensure technology-based solutions for some of its operations. Sanctioning of one-time settlement in deviation of bank's recovery policy resulted in sacrificing of principal amount of Rs 17.97 crore in test-checked cases.
"The bank sold 10 NPAs to Asset Reconstruction Companies (ARCs) during the period 2014-2018 by sacrificing principal amount of Rs 671.10 crore and unapplied interest of Rs 504 crore. Sale of financial asset to ARC below the reserve price resulted in loss of Rs 21.89 crore.
"Imprudent decision-making, non-invoking of guarantee and non-safeguarding of bank's interest led to doubtful recovery/loss of Rs 180.43 crore in test-checked Non-Performing Investment. "Irregularities in recruitment of Relationship Executives and Banking Associates were noticed.
"The bank had spent 53.09 per cent to 83.82 per cent of Corporate Social Responsibility (CSR) budget during 2016-17 and 2017-18 on a single activity/project and had also incurred 49.33 per cent to 95.27 per cent under a single segment during 2015-16 to 2017-18, which was in violation of CSR policy. Further, in contravention to CSR policy and Companies Act 2013, an irregular expenditure of Rs 46.96 crore was incurred out of CSR fund".
( With inputs from IANS )
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