‘Caused grave harm to institution’: Himachal government suspends Kangra Central Cooperative Bank board over financial irregularities

The suspended board includes bank’s Chairman Kuldeep Singh Pathania and directors such as Bharat Bhushan Mohil, Atam Prakash, Hiteshwar Singh, Karan Singh, and Lekh Raj, among others. All board directors, including Pathania, have been served a show-cause notice under Section 37 of the Himachal Pradesh Cooperative Societies Act, 1968, asking them to explain within 10 days why they should not be removed from office and disqualified from participating in future cooperative elections.

The board members are scheduled to submit their replies by September 22.

In the show-cause notice, the registrar stated that the board failed in its fiduciary duties by neglecting depositors’ interests, disregarding statutory provisions, and allowing operations detrimental to the bank’s stability. “In exercise of powers under Section 37(1) of the Act, we call upon the directors to explain their acts of omission and commission that have caused grave harm to the institution,” the notice read.

The latest NABARD inspection report, dated March 31, 2024, and received on March 27, 2025, pointed to alarming issues, including financial deterioration — specifically, asset erosion of Rs 767.45 crore and provisioning shortfalls of Rs 11.34 crore. It also flagged rising non-performing assets (NPAs), with gross NPA at 23.45 per cent and net NPA at 8.81 per cent, far above the permissible limit of 5 per cent.

The order issued from Negi’s office stated some of these financial issues — unauthorised lending (1,090 loans sanctioned outside the operational area, with 80 per cent classified as NPAs); KYC and compliance failures (lapses in anti-money laundering protocols, wrong loan classification, and failure to report frauds on time); fraud and internal controls (detection of Rs 8.64 crore in new frauds and 241 pending fraud cases amounting to Rs 20.99 crore); and operational lapses (rejection of government subvention claims worth Rs 22.30 crore due to delayed submissions).

The registrar’s office further noted that NABARD has repeatedly warned the bank since 2015-16, with reports stating that the board’s functioning endangered depositors’ interests. Past boards were also subjected to show-cause notices and suspension, with court cases confirming the legality of such actions.

Past findings also flagged violations

It is not the first time when the BoD of the KCCB was suspended owing to the adverse findings of the NABARD, an apex body for the rural credit in the country.

The board constituted in 2013 was also suspended in 2018 due to similar concerns. The previous board had approached the Himachal Pradesh High Court against the suspension, but their plea was dismissed in 2019, allowing for the formation of a new board.

In March, the Reserve Bank of India (RBI) penalised the KCCB for various shortcomings and omissions with a monetary penalty of Rs 25 lakh. The KCCB was among eight cooperative banks, which were penalised, and the KCCB was slapped with the highest penalty.

In January, the State Vigilance and Anti-Corruption Bureau (ACB) of Himachal Pradesh booked unknown officials of the KCCB along with one Yudh Chand Bains, proprietor of Himalaya Snow Village and Hotel Lake Palace, for allegedly disbursing a long of Rs 20 crore to Bains in violations of guidelines of the RBI and NABARD.

Two days after the suspension of the board, the bank’s Managing Director Vinod Kumar had reassured customers that there was no cause for alarm.

Speaking to The Indian Express on Saturday, the MD said, “We have approximately 18 lakh customers and 217 branches across five districts — Kangra, Una, Hamirpur, Kullu, and Lahaul & Spiti. The suspension of the board does not mean that the routine work of the bank has stopped. The money of our customers deposited in the bank is safe. In a temporary arrangement, an administrator has been appointed to oversee the day-to-day operations”.

Notably, it was Kumar who confirmed all the adverse observations recorded by the NABARD related the supervisory concerns to the office of Registrar Co-Operative Societies, Himachal Pradesh.

KCCB, established before Independence in 1920, plays an important role in supporting the livelihoods of people in Himachal Pradesh. It promotes agriculture and strengthens cooperative societies in the region’s hilly terrain. The bank operates with a wide network of 217 branches across Kangra, Una, Hamirpur, Kullu, and Lahaul & Spiti, serving around 18 lakh customers.