Baghat Urban Cooperative Bank Crisis: Former MD Defaults on Rs 40 Lakh Loan, Internal Scam Exposed

The Solan-based Baghat Urban Cooperative Bank is struggling to recover its rising Rs 126-crore bad loan portfolio. But new details show something even more worrying — some of its own employees allegedly misused the bank’s systems, adding to the financial crisis. Facing an acute financial crisis, the Baghat Urban Cooperative Bank finds itself unable to pay salaries for October to its 112 employees.

One shocking case involves a former Managing Director who served from 2016 to 2021. In December 2018, he took a Rs 40-lakh housing loan from the bank. Instead of paying it back on time, he repeatedly defaulted. The loan was finally marked as a Non-Performing Asset (NPA) in January 2024, even though another bank employee had given a guarantee and a property was pledged as security.

What’s more alarming is that the pledged property has still not been auctioned. Officials say the outstanding amount could have easily been recovered from the officer’s post-retirement benefits. “Only a very small amount has been paid. Nearly Rs 35.80 lakh is still unpaid,” a bank official said. The case highlights how the bank turned into a free ATM for powerful insiders who took huge loans and avoided repayment.

The bank has now invoked the SARFAESI Act, 2002. A senior official confirmed that documents are being sent to the District Magistrate for permission to take possession of the former MD’s property in the Khleen area of Solan.

But there are big doubts about how much money the bank can actually recover. Many of the pledged properties were valued far above their real market price, and the bank has repeatedly failed to sell them through auctions. On November 20, all 28 properties listed for auction got zero buyers due to inflated valuations. The next auction is scheduled for December 12.

Even with strict recovery action, the bank’s loan situation has barely improved. NPAs have reduced only slightly — from Rs 138 crore to Rs 126 crore since October 6. The number of loan defaulters has also dipped marginally from 499 to 460.

Meanwhile, Baghat Urban Cooperative Bank remains under heavy pressure. The Reserve Bank of India is closely monitoring its recovery efforts. Since October 6, the RBI has imposed strict restrictions allowing customers to withdraw only up to Rs 10,000 each for six months. The bank also cannot issue fresh loans, renew credit limits, or accept new deposits without prior permission.

As the RBI review approaches, the bank now faces a critical question: can it show real progress, or will its internal failures continue to sink it deeper?