Since it took over last year, the governor’s administration in Jammu and Kashmir has circled the J&K Bank, the grand old financial institution that has long been plagued by rumours of corruption but resisted submitting to regulatory controls.

Although the state government owns 59.3% of the equity, the institution, established in 1938, is listed as an “old private sector bank” under Reserve Bank of India norms. These are institutions that existed before Indira Gandhi decided to nationalise all Indian banks in 1968 but kept their independence because they were too small or specialised to be nationalised.

Last year, the governor’s attempts to declare the bank a public sector unit and make it accountable to the state legislature were thwarted by widespread public protests. This month, officers of the governor’s administration went for the kill.

Chairman Parvez Ahmed was sacked on charges of corruption and replaced temporarily by RK Chibber. The anti-corruption bureau raided the bank to investigate allegedly fraudulent appointments. Under Chibber’s stewardship, the bank will finally have to comply with the guidelines of the Central Vigilance Commission and the Right to Information Act.

The ‘people’s institution’

This is no ordinary anti-corruption drive against a struggling financial institution. The J&K Bank, feted as the “pride of the people”, carries symbolic weight that is far greater than its financial heft. The 80-year-old bank it is one of the few institutions that endured through decades of conflict. In many popular accounts, it is valorised for looking after the interests of the poor and old.

Till 2011, it was the lender of the last resort to the state government, much like the Reserve Bank of India at the Centre. Since then, the Reserve Bank has carried out general banking business, although the J&K Bank is its agent in the state.

In Kashmir, the autonomy of the bank, even from the state government, is held sacrosanct. In a Valley with a long history of separatism, the J&K Bank often embodied Kashmiri political aspirations better than the state government. Banker to leaders from across the political spectrum, including separatists, its success has often been attributed to the absence of government interference.

Yet, over time, the bank was absorbed into a complex matrix of power that involved the political and financial elites of Srinagar, and which thrived with acquiescence from Delhi. With the state under Central rule since last year, that has changed.

As officers of the anti-corruption bureau conducted raids on the bank, the governor declared war on the “ruling elites” and promised “big news” that involved “former ministers”. Delhi no longer seems shy of taking direct charge of Srinagar.

Private matters

A flurry of charges could see the Central Bureau of Investigation and the Enforcement Directorate descending on the J&K Bank. They range from nepotism and backdoor appointments to misappropriation of funds and questionable loans which turned into non-performing assets. Meanwhile, the National Investigation Agency, while inquiring into cases of terror funding, also took a lively interest in the bank.

Chairman Parvez Ahmed, for one, seems to have presided over a family network: relatives were installed in key positions, bank branches were run from properties owned by him and his in-laws, deals were signed with companies where other family members worked.

But these family ties are part of a larger ecosystem based on sifarish, or favours. Some of the raids and arrests this week suggest just how deep the nexus between the bank and the Valley’s political and financial elites might be.

Former chairman Parvez Ahmed. Credit: JK Bank via Facebook

For instance, the Anti-Corruption Bureau has filed a case against Sheikh Imran, businessman and deputy mayor of Srinagar, as well as several officials of the bank for misappropriating subsidies. It is also alleged that Imran made liberal use of the bank’s overdraft facilities to finance his business units. When some of these turned into non-performing assets, he reportedly struck a deal with the bank to waive Rs 33 crore in liabilities.

Then, while the state government infused over Rs 500 crore in capital to the bank, it coolly gifted crores under corporate social responsibility to the Royal Springs Golf Course in Srinagar, frequented by the city’s rich and powerful.

A jobs bank

Perhaps it was the nature of the bank that enabled successive dispensations to treat it as a private coffer meant for the use of those in government. The only listed company in the state, it controls 60% of its loans and deposits. So while it gets most of the state business, it has less accountability than a public sector bank. For years, it has been a fertile source of political patronage.

With about 14,000 employees, the bank is one of the biggest sources of jobs in the Valley. The competition for jobs can be gauged by the numbers: this year, 1,44,000 took tests for the post of probationary officer and banking associate.

That is where local parties stepped in, distributing bank jobs as political largesse in return for support. The Anti-Corruption Bureau is investigating at least 1,200 fraudulent appointments allegedly made at the behest of the People’s Democratic Party-Bharatiya Janata Party dispensation that ruled the state until last year.

For a long time, this system of patronage worked well for the political elite. But over the last few years, the majority has drifted away from electoral politics in the Valley. There are also pockets of disenchantment with the old separatist politicians, seen to have made too many accommodations with the government both at the Centre and in the state.

The bank, in turn, is increasingly associated with the depredations of a political system that has lost public trust. In South Kashmir during the run up to the 2019 Lok Sabha elections, for instance, a common grievance against the People’s Democratic Party was its habit of providing bank jobs to ludicrously underqualified youth. The Anantnag seat, which covers the four districts of South Kashmir, went to polls in three phases because of security threats and saw a dismal turnout of 8.76%.

On Delhi’s terms

Sensing the weakness of regional parties, Delhi has broken the old omerta.

For decades, Valley-based parties such as the National Conference and the People’s Democratic Party held up a semblance of elected government in Kashmir. Also for decades, the Centre, the regional parties and the separatists participated in a byzantine system where the actual sources of power were obscured. It fed into the popular myth of a mysterious “markaz” or Centre working behind the scenes in Kashmir.

Now, Delhi is happy to be seen calling the shots, taking a battering ram to the local economies that have sustained the Valley’s elites for so long. The National Investigation Agency started cracking down on separatist leaders from 2017. After Central rule was imposed in 2018, cleaning up the system became Governor Malik’s cause célèbre.

Since taking charge, Malik has reconstituted the Anti-Corruption Bureau, giving it more powers, setting up local units in police stations across the state. He has also sacked 44 public prosecutors and 400 standing counsels appointed by the previous dispensation, apparently to streamline the state administration, lighten the burden on the public exchequer and shed political appointees. The J&K Bank, it is predicted, will be stripped down and remade in Delhi’s image.

At the same press conference where he promised action against the ruling elites, Malik rejected “azadi” as an option for Jammu and Kashmir. He also rejected “autonomy” for the state within the ambit of the Constitution – an idea traditionally pushed by Valley-based parties. Militants were invited to lay down arms and “join [him] for dinner”.

The message is clear: the Centre no longer needs the existing elites to hold on to Kashmir. The Valley has to negotiate directly with Delhi, on Delhi’s terms.