Srinagar- Valley’s apex industrial chamber, the Federation of Chambers of Industries Kashmir (FCIK) has called on J&K Bank to prioritize the cultivation of long-term loyalty among its local customers, recognizing that their profitability depends on this relationship and is vital for Bank’s sustainable growth and resilience.
Attributing the bank’s profitability solely to the depositors and borrowers from the J&K region, FCIK has warned that the bank must not risk losing their support and loyalty anytime in the future.
Providing details, FCIK highlighted that of the total deposits amounting to 137918 Crores, an impressive 123000 Crores originated from J&K region accounting to 89%.
“The Current Account Savings Account (CASA) ratio has given J&K Bank a competitive advantage over its counterparts, with 48.60% of its deposits (nearly half) stemming from “no-cost” or “low-cost” current and savings accounts” stated FCIK, adding that despite receiving no interest from the bank, the current account holders were being charged for every little service.
FCIK has also highlighted the cost of deposits for the bank which throughout remained as lowest amoung Indian scheduled commercial banks and stood at 4.4% in financial year 2023-24. In the previous years, such cost of deposits stood at 3.8%, 3.65% and 4.10% for the financial years 2022-23, 2021-22 and 2020-21 respectively.
FCIK stated that this deposit profile has been crucial in sustaining J&K Bank’s margins and profitability, attributing this success entirely to the unwavering support of local depositors.
FCIK also credited J&K Bank’s success to its majority government ownership and its role as the agency bank for the Union Territory of Jammu and Kashmir. This relationship has allowed the bank to consistently attract retail deposits, as all transactions related to the UTJKL government, including employee salaries, are routed through J&K Bank.
With loans and advances amounting to 96,139 crores, FCIK has emphasized J&K Bank’s dependence on local borrowers as around 66000 Crores of these portfolios accounting to 68.5% are held by borrowers in the region.
“Of the 66000 Crores in loans in the region, a significant portion around 23000 Crores or 24% of overall portfolio consisted of retail loans granted to local employees in the region which are all secured and backed by government guarantees”, stated FCIK, adding that in addition the advances to Government from time to time also included in the portfolio happened to be fully secured.
While recognizing that J&K Bank has been the sole provider of financial support to local businesses after other banks disappeared from the scene after eruption of turmoil in 1989, FCIK expressed regret that the terms of these advances and loans have often been significantly unfavorable to borrowers.
“Most of the loans granted in favour of the local business community have been secured with increased collaterals and guarantees even having no regard to the collateral-free schemes launched by GOI”, stated the chamber.
The Chamber also noted with concern that interest rates charged to the borrowers have been exorbitantly higher than those charged by banks across India on the pretext of volatile law and order situation and need to cover market risks. There are instances that even poultry industry under Agriculture segment has been overcharged by 4-5%.
Despite the challenges faced by local borrowers, the bank’s Non-Performing Assets (NPA) ratio has significantly decreased to 3.95% from 8.7% in the financial year 2021-22. This improvement is primarily attributed to the determination and commitment of local borrowers to repay their loans, with many even resorting to selling ancestral properties in response to the coercive methods adopted by the bank.
However, FCIK has sought clarity on the reduction of NPAs, especially in light of reports indicating that substantial loans outside the Union Territory have been written off due to their unsecured status.
The Chamber observed that the bank’s anti-customer approach and use of coercive methods is rapidly alienating its loyal customers, many of whom have already switched their allegiance to other banks, while others are contemplating similar moves. The bank could face significant challenges if it loses the support of its local customer base, which is crucial to its very survival.
FCIK is now looking to the newly appointed Omar Abdullah government to intervene in J&K Bank’s affairs to restore local loyalty and address pressing concerns. The Chamber stressed the importance of ending coercive practices that alienate the bank’s core customers. Additionally, it highlighted the need to investigate the longstanding exclusion of locals from top positions and the board, as their inclusion is vital for strengthening ties with the community.
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