Anil Deep Mehta
Founded on October 1, 1938 by the then Maharaja of Jammu & Kashmir, Maharaja Hari Singh, J&K Bank commenced banking business on July 4, 1939. J&K Bank is defined as a government company as per provisions of Indian Companies Act 2013. Post-independence, the two branches of the Bank out of 10 branches viz. Muzaffarabad, Rawalkot and Mirpur (now PAK) fell to the other side of the Line of Control along with cash and other assets. In 1971, the bank acquired the status of a Scheduled bank and was declared an ‘A’ class bank by Reserve Bank of India in 1976. J&K Bank is the scheduled commercial and one of oldest private sector banks in India and as a state-owned bank in the country. The bank’s equity is held by Governments of UTs of Jammu and Kashmir and Ladakh (distributed after bifurcation of UTs of Jammu and Kashmir and Ladakh from erstwhile J&K State)and also by public. The participating percentage of equity as on last audited annual financials ending March 2022 is, Promoters: 70.12 per cent, FIIs: 00.71 per cent, Mutual Funds: 00.21 per cent and others: 28.96 per cent
The shares of the bank are listed in the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). J&K Bank is also sponsor bank for J&K Grameen Bank with a share holding of 35 per cent engaged in providing all kinds of financial services in UT of J&K and Ladakh. J&K Grameen Bank was established on June 30, 2009, and is functioning in 11 districts in the Union Territory of Jammu & Kashmir and 2 districts in UT of Ladakh. Bank provides investment & stock broking through its wholly owned subsidiary JKB Financial Services Limited (JKBFSL) and under bank assurance has tie up with reputed companies for life as well as for non-life insurance. The bank celebrated its platinum jubilee in 2013 and in this October it will be completing 84 years of existence. In July 2020, the bank figured among the top 4 banks in India in achieving targets in digital payments, contributing towards ‘Digital India’ mission. The bank has its branches all across the country covering length and breadth of the country except north-east region, where it has not yet made any foray. It has precisely 2384 touch points as on March 2022 comprising of 980 branches, 1404 ATMs. Out of these 980 BUs, 820 are operating in the Union Territory of Jammu & Kashmir, 36 in Union Territory of Ladakh and 124 are operating outside the UTs of J&K and Ladakh. Bank has 77 Easy Banking Units (EBUs) in UT of J&K and Ladakh out of which 35 EBUs are operating in UT of Ladakh. From a stature of a regional bank it has assumed the status of old age private sector bank. It has emerged as a leading institute / premium brand of J&K and Ladakh and is fulfilling UT government’s developmental plans, whether it is financial inclusion or poverty elevation programs. The data of UTLBC (Union Territory Level Bankers’ Committee) will vouch that bank is the highest achiever of annual action plan targets persistently for so many years and business wise possesses monopolistic share of total banking business registered by all banks in a financial year in J&K and Ladakh. It continues to be the major financial player in these territories with market share of 64 per cent in J&K and 58 per cent in Ladakh, which though has decreased compared to near 70 per cent few years back in erstwhile state of J&K. Out of total credit exposure bank has share of 56 per cent in J&K and Ladakh and 44 per cent in rest of India. The core strength of the bank is resilience which has made it withstand the ordeals occurred one after the other either by wrath of God or by disturbances on account of unrest. The bank has passed through the challenges caused sequentially first by floods in the valley due to spread of coronavirus (COVID-19) and various other reasons. The bank has always come to the forefront as a savior of sinking business activities because of aforementioned factors and kept the hopes and businesses afloat by providing timely help. No surprises then that in UTs of J&K and Ladakh J&K Bank enjoys trust of maximum banking population and has a major share in all banking business and has a customer base of 2 crore approx. The tree which bears the maximum fruit receives maximum stones and J&K Bank was no exception. Being single most performer within territories of J&K and Ladakh it’s working was watched minutely by the stakeholders and media alike and lot of decisions taken by it were criticized in print as well as in social media. The performance of the bank came into close scrutiny particularly for the decisions taken during the period starting October 2016 up to June 2019. The Bank has been allegedly accused on multiple occasions of un-accountability and resultantly lostthe trust of the major stakeholder which not only resulted into unholy sacking of the then Chairman-and CEO but also opened floodgates of investigation by various outside agencies. Since certain issues are under the scrutiny of the courts and thus will not be appropriate to comment on their relative merits. Apart from the incumbent boss lot of staff was also investigated having cascading affect which resulted into casting an element of fear in the psyche of staff and majority of the operation resources started taking extreme caution even for simplest of transactions. It is a fact that banking is a job of taking decisions, which entail risks, and if a decision goes adverse does not necessarily imply that there is some malafide. The investigations were ripple effect of the actions of the top echelon of power and had the incumbent boss resigned on-time, on knowing the displeasure of all stakeholders, the ire probably would have not fallen on the staff down the line. The data performance parameters discussed somewhere down in the article will reveal the affect caused by the unfortunate raids and investigations. This notoriety also gets mention in Wikipedia’s brief description about the bank. In my personal opinion the aforementioned period goes down as the darkest period in the annals of the bank and also in the memory of our generation. But J&K Bank has over the years made its presence felt across length and breadth of the country and also by dint of its persistent performance emerged as most preferred bank in UTs of Jammu &Kashmir and Ladakh and now considered as the premier institute of this geography notwithstanding negativity spread by some vested interests. The bank has acquired the position because of excellent human capital it possesses. The staff of the bank is one of the finest in the industry which can be judged from the fact that the new age private sector banks consider it imperative to poached on to the existing staff in order to hold foot in this territory. Not only they save training cost on poaching on to trained staff of JK Bank but also get business referrals in the bargain. While posted in rest of India branches the staff performs as ambassadors and achieves desired results for the bank.
Deposits: The journey for the last 5 years reveals that position on deposits have remained commensurate with industry trend and growth trajectory is by and large satisfactory i.e., grown at compounded annual growth rate (CAGR) of 8.75 per cent approximately. Off late bank has almost surplus funds of more than Rs 5000 to Rs 8000 crore and thus it has as a matter of strategy focusing on retail deposit and discouraging corporate and/or inter-bank deposits. CASA deposits, which are primarily low cost deposits comprising of balances held in saving and current deposit accounts, have resultantly increased, which is considered as position of strength is banking parlance. CASA deposit at 57 per cent probably is best in the banking industry, second only to newly entrant Kodak Mahindra Bank.
Advances: From the data above it can be seen that advances (primarily loans expended) has grown by 16.44 per cent in FY 2018-19 but became casualty thereafter pursuant to unfavorable events and surge of investigation of staff by outside investigative agencies and negative news spread against the bank. The portfolio grew by CAGR of 5.50 per cent only. Since bank’s primary job is to lend the lukewarm performance of the bank, which was on certain occasions less than the national average, is a consequential effect of mental blocks and fear the ground staff has gone through. Still on minute study the picture does not look very gloomy as growth in hinterland was more than 12 per cent but was been bogged down by performance in rest of India. Bank has accordingly revisited its strategy and has embarked on new initiatives and structural changes ostensibly to boost its business in rest of India. The scope of further dispensation is large, particularly in Jammu where huge investment is expected pursuant to announcement of industrial package and incentives by UT of J&K. The performance of J&K Bank though is appreciable in priority sector lending where CAGR of 11.50 per cent is observed and for the last three persistently meeting and surpassing the 40 per cent target prescribed by RBI for all banks. Bank’s achievement has been excellent in sponsored cases and has been praised in UTLBC meetings for its performance remaining better than all other banks in UTs of J&K and Ladakh.
CD Ratio: CD ratio in percentage gives us an idea how much money is given in loans for every Rs.100 rupees of deposit received. Higher CD ratio is considered as depositors money put to constructive use. J&K Bank has CD ratio of 73.93 per cent in FY 2018-19 but in subsequent years it decreased continually on year to year basis. The CD ratio of the bank was at 61.37 per cent as on March 2022. The decline in ratio over the years infers that advances have not grown in proportion to growth rate in deposits. Bank has identified niche area where fresh dispensation can be made and pursuing that it has modified most of its advances products to make them conducive to the demand emanating from the market.
Non Performing Assets: Non Performing Asset (NPA) is a asset, largely loans, which has stopped performing and thus categorized as non-performing asset and the interest applied on that asset, though recoverable, yet is not taken into profit till the time NPAs status remains and which is also reckoned as an important parameter in assessing the strength and performance of any bank. Banking sector having gone through the worst phase throughout the country also affected J&K Bank and NPAs has remained a bigger challenge for it all through these years. The Gross NPAs and Net NPAs however have reduced a bit yet lot of effort is required in this critical area. Reduction in NPA will directly result in generation of revenue and improvement of bottom line (profit) of the Bank. Lot of rumors have been spread, which have no base, thus official declaration should be relied on than on the rumor mongers.
Provisioning Coverage Ratio (PCR): PCR is a provision, prescribed by RBI, which is a cushion created against the bad debts/NPAs from the profits of the bank just in case in worst case scenario the bank have to fall back upon. It is an insulation against the shocks bad debts can cause to a bank. The per centage denotes the extent the provision is created against the bad debts. Bank’s PCR at 84.26 per cent as on 31st March 2022 is one of the best in the industry and reveals the preparedness and strength of the bankfor NPAs. More recovery in bad debts will unlock the more provision and will result into boosting of profit.
Profit: The net difference between the interest earned from loans and advances and interest dispensed on deposits gives the net profit. J&K Bank after recovering from mammoth loss of Rs 1632.29 crore in FY 2016-19 registered profit in subsequent financial years 2017-18 and 2018-19. Bank again has to suffer loss of Rs 1139.41 crore in FY 2019-20 because of down-gradation of loans and spurt increase in GNPA to 11.91 per cent from 9.39 per cent from the corresponding previous year. But with sustained efforts bank is in profit for the last two financial years and has registered a net profit of Rs 502 crore as on March, 2022. With bank having registered net profit of Rs 165.97 crore in first quarter the annual profit is expected to be more than Rs 700 crore in the ensuing financial year.
Cost to Income Ratio: This ratio throws up an idea how much cost bank incurs against the income earned by it and is a very important parameter in assessment of any bank’s performance. This ratio in J&K Bank has been on continuous rise and has been a matter of great concern. The ratio which was at 58.95 per cent in FY 2017-18 rose to 64.14 per cent in FY 2019-20 and exorbitantly to 76.57 per cent in FY 2021-22. Sudden spurt can be attributed to fresh recruitment bank has made in the last financial year and also revision in salary in banking industry. Major component of cost is establishment cost incurred on staff and is more or less a fixed component and has to be made even the institute is in red. Only alternative available to cut unnecessary cost and improve the income. Realizing and understanding this aspect bank has devolved on a policy where need to increase the interest income, by focus increase in credit portfolio, and also efforts to increase non-interest income and other income.
Return on Assets: The ratio is an indicator how much profitable is bank against all the assets deployed by it. Commensurate to journey of other vital parameters return on assets has moved up and down intermittently. But the ratio is continually improving for the last two financial years on improvement of overall business of the bank. The above explanation clearly reveals that J&K Bank has stronger parameters, exhibits strength and is safely placed. It is poised to achieve total business of Rs 2.22 lake crore, earmarked by it in ensuing FY 2022-23. With the structural changes and revisiting of working model the bank has already made bold but prudent moves which by persistent follow up will definitely give rich dividends. Chief Secretary UT of J&K while inaugurating multiple J&K Bank initiatives under Azadi Ka Amrit Mahotsav praised the bank for doing well in very difficult times and urged the bank to keep the spirit of being the best and emotional connect with the people of J&K intact. He asked the bank to gear-up to capitalize on the huge upcoming business opportunities available in the UT and expecting to grow together wished the bank a great future. The confidence of the top bureaucrat speaks volume on strategic importance of J&K Bank and the future which it beholds. Setting asides all the mis-informations surmounted by rumor mongers and vested interests J&K Bank is beyond doubt a functional marvel of J&K. It must embark on the growth path designed for it by the destiny and justify the adage fits suitably to its stature-A Jewel In The Crown.
(The author is former General Manager, J&K Bank)