The Comptroller and Auditor General (CAG) of India has uncovered serious financial irregularities and systemic failures at the State Bank of Sikkim (SBS), involving direct cash frauds, questionable loan sanctions, mounting non-performing assets (NPAs), and the transfer of crores of rupees into personal bank accounts of SBS employees, as detailed in its Performance Audit for the year ending March 2023.
One of the most alarming findings is Table 5.1 of the audit, which records ₹3.64 crore deposited into the personal accounts of 35 SBS employees by bank loanees, based on management’s own records. The beneficiaries include officials across the hierarchy, ranging from Ex-Chairman K.B. Chamling (₹5 lakh), CGM S.R. Karki (₹26.58 lakh), AGM Reena Basnett Rai (₹28.20 lakh), Senior Manager Sunil Kumar Tamang (₹20.42 lakh), to Manager Susan Sharma (₹1.43 crore). Several Assistant Managers, Accounts Assistants and Junior Accounts Assistants were also recipients. CAG flagged these transactions as a serious violation of banking norms, as employees are prohibited from receiving money from borrowers due to conflict-of-interest risks.
In addition to these deposits, the audit revealed direct branch-level cash frauds. One of the clearest cases emerged at Phodong Branch where a cash shortage of ₹10.41 Lakh was detected in October 2020. The amount was fraudulently withdrawn by the Branch Manager-in-Charge by filling withdrawal slips in his own name without making entries in the Core Banking System. Although the entire amount was later recovered, the officer was merely downgraded instead of being dismissed, highlighting lenient disciplinary action.
At Namthang Branch a more serious misappropriation of ₹13.80 lakh was uncovered. The late Branch Manager, along with a cashier and assistant manager, withdrew money from customer accounts without authorisation. Only ₹3.50 Lakh been recovered so far, leaving the majority of the amount unrecovered even after several years.
Another major fraud occurred at Mangalbaria Branch, where a Junior Accounts Assistant, in connivance with the Branch Manager, misappropriated ₹27.57 lakh by illegally withdrawing funds from customer accounts. Alarmingly, the Branch Manager had earlier faced similar allegations in another branch but was reinstated without conclusion of inquiry
The audit further exposed large-scale loan irregularities. SBS sanctioned loans worth ₹913.37 crore to government departments and public sector undertakings, out of which ₹555.93 crore became NPAs. A major exposure was to Sikkim Power Investment Corporation Limited (SPICL), which received ₹209.27 crore despite weak repayment capacity. Outstanding dues against SPICL later rose to ₹338.50 crore, with recovery remaining uncertain.
Loans to private borrowers were also flagged. Several projects, including stone crushers, dairy units and construction ventures, received loans ranging from ₹2 crore to ₹6 crore, but were either non-functional or incomplete. Repayments were negligible, leaving crores outstanding.
CAG also highlighted excess commission payments of ₹3.16 crore to collection agencies, arbitrary One-Time Settlements causing a loss of ₹5.51 crore, and suspicious high-value transactions worth ₹4.19 crore routed through staff accounts, pointing to weak anti-money laundering controls.
Taken together, the findings reveal deep-rooted banking administration failures, including poor due diligence, lack of post-sanction monitoring, ineffective internal audits, and weak disciplinary action. The audit has raised serious concerns over the safeguarding of public money and accountability at Sikkim’s only state-owned bank, calling for urgent corrective measures and strengthened oversight.
