Sourabh Sood
Shimla: As the complexities surrounding the Baghat Urban Cooperative Bank crisis unfold, a recurring theme emerges: the significant and enduring impact of political power.

The bank, similar to other cooperative entities in Himachal Pradesh, did not operate solely as a financial institution. Instead, it was entangled in a political framework where decisions were influenced more by personal loyalties and affiliations than by sound financial practices. This political environment gradually became a primary factor contributing to the bank's downfall.

Board members were frequently appointed based on political affiliations rather than their professional qualifications. Once in their roles, these members leveraged their positions not just for oversight but also to sway loan approvals. Insiders report that loan applications from politically connected individuals often escaped rigorous scrutiny, irrespective of the quality of collateral or the ability to repay.

The bank served as a convenient mechanism for political factions to reward supporters, contractors, and business partners. Many borrowers expressed confidence in securing loans, believing that “the Board is with us.”

Shift from Financial Assessment to Political Favoritism

Over time, the bank's decision-making process transitioned from evaluating financial viability to aligning with political interests. When a borrower with substantial political backing sought credit, any objections from staff or appraisers were often disregarded. Meetings intended for risk assessment became mere formalities, with decisions pre-determined before discussions commenced.

This shift not only eroded the bank's operational integrity but also conveyed a clear message to employees: questioning loans backed by political figures was neither productive nor appreciated. As this mindset took hold, the bank's decline accelerated.

Political Interference in Loan Recovery

The political meddling extended beyond loan approvals into the recovery processes. When significant borrowers defaulted, recovery notices were either delayed or softened. Some defaulters received multiple extensions due to their connections with influential individuals.

In some cases, these individuals attended board meetings informally, using their relationships with board members to negotiate leniency on repayments. Each occurrence further undermined the bank's authority and reinforced the notion that political influence could supersede financial accountability.

Internal Power Struggles and Their Consequences

The bank also became a battleground for internal power struggles. Changes in political leadership led to shifts in the board's dynamics, with members loyal to one faction being replaced by those aligned with another.

In this ongoing conflict, the bank's long-term interests were neglected. Decisions regarding files, appointments, recovery actions, and even auditor recommendations were swayed by the political group in control at any given time. What should have been a financial institution devolved into a factional battleground, severely compromising fiscal discipline.

Regulatory Oversight and a Culture of Silence

Even regulatory oversight was compromised by these political influences. Inspections that should have prompted strict actions were often lenient, as confronting powerful individuals could lead to undesirable consequences.

The Registrar’s office operated under political pressures that often dictated the urgency and seriousness of interventions. Consequently, even when early warning signs emerged, enforcement was neither timely nor robust enough to avert the escalating crisis.

Today, many staff members acknowledge that the political presence was so pervasive that officers hesitated to make bold decisions. They feared repercussions, including transfers or accusations, if they acted against politically shielded borrowers.

This environment fostered a culture where silence was deemed the safest option, even when documentation indicated risk. Employees reported raising concerns in meetings but were subtly reminded of the political affiliations of certain borrowers. When political influence infiltrates daily operations, financial discipline is often the first casualty — a reality that played out at Baghat Bank.

The Aftermath of Political Manipulation

As the institution grapples with significant non-performing assets (NPAs), the political forces that once exploited the bank are now distancing themselves. However, the repercussions of their actions linger in every unpaid loan and deteriorating balance sheet. This crisis represents not only a financial failure but also a political one.

It highlights how a cooperative bank, originally intended to benefit the public, was instead manipulated to serve a network of power, influence, and personal gain. Ultimately, the system designed to safeguard the community became one that protected only a select few.