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| J&K Bank lends Hundreds of crores to corporate clients | | Flouting Procedural norms | | Bashir Assad
srinagar, May 1: The Jammu and Kashmir Bank is likely to suffer loss worth more than Rs 500 crores on account of the loan granted to some little known corporate clients outside the state and the 100 crore lending granted to Kingfisher Airlines without actually without a guarantee both in terms of assets or personal.
Though 500 crore lending is not a big amount for a bank like J&K bank which is the only bank in the country that is the sole banker to the state Government, the amount is too hefty for the poor consumers of the state who have to bear the brunt in the long run. As of today Jammu and Kashmir Bank is brushing everything under the carpet because all central Government funds to the state Government flow through the bank and salaries of the state Government's 4,00, 000 employees are deposited in the bank which gives it a huge deposit base at an extremely low cost, however, the loss which is due their against the lending to corporate clients outside the state on wills and frenzies of political elites who bother little about the ultimate consequences of such lending provided without any security.
The saying goes that love finds no fault and it was due to this love that in 2009 decks were almost cleared for electing Vijay Maliya to the Rajya Sabha from the state which governed article 370 of the Constitution of India and it was again this love which necessitated lending 100 crores to his sinking Airlines .
No doubt, militancy has put paid to industrial activity in Jammu and Kashmir for last twenty years due to which the bank was forced to look for its client base outside the state but now when the situation has improved to the maximum it would have been in the fitness of the things to encourage local entrepreneurship for revival of sick industry which is lacking incentives despite tall claims of the Government. Borrowing from the bank for local clients like educated youth who want to avail self employment programs was difficult as the lending procedures are so complicated that most of the aspirants give up in the middle while on the other hand lending for unknown or little known outside corporate clients and those under distress like Kingfisher is a cakewalk.
Getting into aggressive expansion mode without actually following proper banking procedures will be having dangerous consequences in the long run. No doubt, Jammu and Kashmir Government holds 52% equity share in the bank but that does not mean the bank will follow the dictates of the political elites. People expect bank getting aggressive in consumer and agricultural loans but unfortunately it is other way round. Sources told Early Times that though the Bank's lending to corporate clients runs in thousands of crores, however, there is no guarantee for return of about 500 crores lended to a few clients recommended by the political elites.
Explaining his interest in the financial health of Kingfisher, Chief Minister Omar Abdullah had publically admitted that J&K bank is one of the lenders to the company. "Any distress suffered by Kingfisher will impact our bank as well," he had said. J&K Bank that has a cumulative exposure of around Rs 100 crores to the Kingfisher is facing problems in managing the restructured account as the company has not serviced it since November 2011. Executives are tight-lipped as they follow the State Bank of India that leads the banking sector on the Kingfisher issue. Two years later, the UB group did nothing much on the commitments it publicly made in Srinagar. Instead, J&K is trying its bit to help the group revive and come out of the cash crisis.
J&K Bank apart, part of Omar's concern comes from the long association that Abdullah's had with Mallyas'. Vijay Mallya was the first major corporate leader who specially flew to Srinagar in January 2009 to share his excitement that "a rock-solid and stable Government" has taken over in J&K.
Announcing that apart from promoting Kashmir as a destination, Mallya said all the abandoned projects will be revived. These included reintroducing hop cultivation in central Kashmir, reviving the group owned Optrex Private Limited, its run down pharma unit in Zainakote and exploring possibilities of importing Pakistani molasses from across the LoC through the twin trans-LoC barter trade opening. Hop cultivation that Mallya's father and Sheikh Abdullah introduced in 1970s was destroyed by militants. |
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