Bank loan

Former chairman, 18 others charged with J&K Bank loan fraud

The CBI on Friday convicted the former chairman of J&K Bank and 18 others for causing the bank to lose Rs 800 crore by providing loans in breach of established guidelines.

The CBI has booked former President Mushtaq Ahmad Sheikh and others including loan recipient REI Agro Chairman Sanjay Jhunjhunwala and Vice Chairman and Managing Director Sandeep Jhunjhunwala.

The case had already been reviewed by the Anti-Corruption Bureau (ACB) of Jammu and Kashmir and it had found during its preliminary investigation that loans worth Rs 800 crore had been sanctioned to the group on the basis false documents between 2011 and 2013 in violation of guidelines. This caused a loss of Rs 800 crore to the bank, ACB sources said.

The bank’s Mumbai-based Mahim branch had sanctioned Rs 550 crore in loans while Vasant Vihar branch in Delhi had sanctioned Rs 139 crore in their favor against vendor bill discounting facility and taking control.

The loans were granted in violation of guidelines, without tangible collateral and on false documents.

The company had approached the Mahim and Vasant Vihar branches of the bank to sanction advances to effect payment to the farmers in accordance with the terms and conditions set out in the bank’s loan sanction order.

“The farmers were supposed to supply paddy to the company, in turn the company was to sell the product (paddy) and the remittance of it was to be deposited in the bank as installments on the advances received by the company.

“The bank authorities and the company knew that the loan amount had to be disbursed among the farmers for paddy production.

“This was brazenly violated by the company in connivance with the banking authorities who allowed disbursement of loans through joint and several liability groups (JLGs), although the company had already received paddy and had no right to disburse the loan in such circumstances.

“According to the investigation conducted during the preliminary investigation, the JLGs were in fact non-existent entities whose references and backgrounds had never been verified by the bank.

“The objective was to allow the company to divert the loan amount to its own advantage.

“The bank also violated NABARD guidelines that members of JLG (which is a farmers group) should be from the same region/village, but this aspect was deliberately and with dishonest intentions ignored by the leadership of the bank,” the CBI FIR said.

The EP had found that these loans were sanctioned and disbursed by J&K Bank branch officials in Mahim, Mumbai, and Vasant Vihar, New Delhi, with the connivance and patronage of J&K Bank Chairman Mushtaq Ahmad Sheikh under a conspiracy spread over several years.

(With contributions from IANS)

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Posted: Friday, March 18, 2022, 7:04 PM IST