In a welcome change of heart, Governor Satya Pal Malik has offered to review the J&K Bank’s accountability to legislature in a bid to address the ongoing protests by the employees and the wider political and civil society opposition to his move of turning the profit-making institution into a Public Sector Undertaking. According to Governor, the PSU status for the bank has “no legal connotations” as the bank will continue to operate under the Companies Act. He also said that the state government would support all initiatives and take the necessary steps to make the bank a vibrant institution. However, Malik defended the provision in the proposal approved by the State Administrative Council, which ruled that the J&K Right to Information Act, 2009, will be applicable to the bank just like other state-owned undertakings. “Transparency will be good for the bank in the long term,” Malik said.
The National Conference and the PDP have welcomed the Governor’s decision to re-examine the bank’s accountability to the state legislature. But they have sought the complete rollback of the Government’s proposal to turn the bank into a PSU. But this is something that the Governor’s statement is silent about. This remains a persisting reason for concern. As a PSU, the bank will be accountable to the state legislature, and the Finance Department will be required to place the banks annual report before the Assembly. The Governor says that the word PSU has no legal connotations but at the same time the bank is sought to be designated as one. This is confusing. How can a company be a PSU and not be accountable to legislature. If latter is the case why not also withdraw the PSU tag itself?
And also why should a Governor’s administration embark on these deeply contentious so-called reforms when they are best left to decide for an elected government? There is no convincing answer. This has rightly created suspicions about the intent of the move. The J&K Bank is an important institution, the only one in the country to be owned by the state government, which has a 59 percent stake in it under the special status for Jammu and Kashmir. But despite that the bank has been allowed to operate largely as a corporate entity. And it has stood to gain as a result. It is the only profitable institution in the state and is the second largest employer after the state government. Besides, J&K Bank is a listed company on the Nifty and Bombay Stock Exchange. Foreign Institutional Investors (FPIs)are among it’s shareholders. Besides thousands of people have invested in its stocks. Any doubt about its governance structure and uncertainty about its profitability will negatively impact the share prices of the bank, leading to FPIs offloading their investment.
There is thus so much that is at stake. A situation like this calls for a government to act responsibly. Governor has shown some appreciation of the state of affairs by promising to withdraw a part of his proposal. But he needs to go the whole hog. The need of the hour is to strengthen corporate governance in J&K Bank and reinforce its autonomy, not hand the bank over to the state government.
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