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| J&K Bank mostly prefers non-state subjects for loans, other credit facilities | | 59 percent goes to corporates, meager 17 percent to locals | | Syed Junaid Hashmi
JAMMU, Sept 11: While extending loans and other credit facilities, Jammu and Kashmir Bank has given far-reaching preference to non-state subjects especially corporate houses over local business entrepreneurs and small unit holders.
Bank has cited credit risk as reason for not extending hassle free loans to state subjects and maintained that it has only small portion of credit mix directly exposed to credit risks from political disturbances in the state. Figures released indicate that 59 percent of the bank's loan book as of financial year 2011 is outside the state of Jammu and Kashmir, of which 57.5 percent is towards corporates.
These revelations have been made by Angel Broking, a respected national stock-broking and wealth management company, in its credit report of Jammu and Kashmir Bank released on August 9, 2011. The report is based on technical and derivative analysis centered on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, the report may not match with a report on a company's fundamentals.
The credit report affirms that state government repaid Rs. 2,300 crore during fourth quarter of financial year 2011 and this amount is likely to be deployed in high-rated corporates outside Jammu and Kashmir. Further, only 17 percent of the total loans have been extended across Jammu and Kashmir, large portion of which is towards the healthy horticulture and trade sectors, which see minimal disruption even during strikes due to essential linkages with rest of the country.
The report asserts that bank's loan book grew marginally by 0.8 percent to Rs. 26,403 crore. Deposits declined by 3.6 percent to Rs. 43,078 crore. Saving deposits increased by strong 3.7 percent; current deposits declined by 21.7percent sequentially, leading to marginal decline in current account saving account (CASA) ratio to 40.4 percent.
The bank's outstanding loan book's concentration within the J&K state is 40 percent while that outside the state is 60 percent. As margins are higher within the state due to lower cost of deposits on account of higher proportion of CASA deposits, bank has failed to increase loan portfolio within the J&K state by the end of financial year 2012.
CDR has witnessed sharp decline despite persistent nudging of the Banks by the government to increase their lending in J&K makes it more serious. Report says that low CDR means that Bank is getting huge deposits from the state and is lending them outside J&K. Money going out of our system does not only result in low investments in J&K but also curtails the opportunities in trade, industry and employment.
State government has rightly impressed upon the Banks operating in the state not to be only after mobilizing the deposits from this state but also lend generously. The report maintains that viability of the projects is something that the Banks cannot compromise on and hence, many viable sectors in the state have remained unexploited and underexploited for want of ample finances.
Secondly, when it comes to the priority sector lending, Banks despite an obligation under RBI guidelines to lend a certain percentage of their total funds to the priority sector have resorted to penny-pinching. Although the aggregate lending target fixed for priority sector for 2010-11 has been surpassed, the lion's share has been contributed by the J&K Bank alone; whereas almost all other Banks have missed their targets.
Similarly, under Micro Credit Sector, banks have disbursed credit facilities aggregating Rs 231.09 crore against the target of Rs.454.27. Under Education Sector, Rs 63.17 crore has been extended against a target of Rs 80.75 crore. It is time government impressed upon these Banks to take the priority sector lending seriously. By lending to the priority sector and increasing the CDR, the Banks operating in the state won't be doing any favour to J&K since it is an obligation under central bank guidelines that they need to follow in letter and spirit.
It needs to be mentioned here that Jammu and Kashmir Bank Limited was incorporated on 1st October, 1938 and commenced its business from 4th July, 1939 in Kashmir valley. Bank was the first in the country as a State owned bank. According to the extended central laws of the state, Jammu & Kashmir Bank was defined as a govt. Company as per the provision of Indian Company's act 1956.
In the year 1971, the Bank received the status of scheduled bank. It was declared as "A" Class Bank by RBI in 1976. Today the bank has more than 500 branches across the country and has recently become a billion Dollar Company. |
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