Economic slowdown, Burhan turbulence wipe out J&K Bank’s profits till middle of 2017;Demand for Islamic banking model being raised with RBI

 Ahmed Ali Fayyaz
SRINAGAR: Jammu and Kashmir Bank’s newly appointed Chairman Parvez Ahmad on Monday assured the people in general and the bank’s depositors in particular that their money was in safe hands even as he revealed that owing to the countrywide economic slowdown and the unceasing Kashmir turbulence, now running in fourth month, have wiped out profitability till middle of the next financial year.
Chairman said that while inheriting both, the bank’s assets as well as liabilities, he had no hesitation to disclose, regretfully, that the State’s premier financial institution was in position to register any profits or give dividends to its shareholders in the current year. He said that due to a slew of reasons, primarily the countrywide economic slowdown, J&K Bank’s non-performing assets had risen to the volume of around Rs 5,000 crore and the process of assets restructuring was continuing. He said that 9.3% NPA, coupled with near-total freeze of business activity in Kashmir valley because of the unrelenting political unrest since July this year, would have a remarkably negative bearing on the bank’s growth.
“There’s going to be no bottomline growth this year and it could affect half of the next financial year”, Chairman said. He was, nevertheless, quick with his reassurance to the bank’s clientele and assured the depositors that their money was very much in safe hands and there was no major reason to leave them worried. He disclosed that the bank was already in the process of approaching the regulator, Reserve Bank of India, seeking some relief for the traders who had enormously suffered due to curfew and shutdown for about 100 days in Kashmir valley.
When asked about the current situation and its impact on the economic activity in Kashmir, Chairman said, “We have a rich experience of working and reporting growth in fragile situation for more than two decades now. We will overcome this situation as well”.
Significantly, Ahmad also revealed that the bank authorities would approach RBI with the demand of a sizable number of customers who wanted Islamic banking model to be operational along with the conventional model. He said that many of the clients were not interested in taking any interest on their deposits. “Since, this model of banking is not in vogue in Jammu and Kashmir Bank, we will seek advice from the regular RBI”, Chairman asserted.
Ahmad clarified that his bank’s bad health in the current year would neither affect different developmental initiatives currently underway as Corporate Social Responsibility (CSR) nor the extensive expansion drive that included setting up of new business units and ATMs and recruitment of staff like Relationship Executives and Banking Associates. He said that the bank would pick up meritorious youths with qualifications and degrees in management. “J&K Bank is the second major employer in the state after the government and we will continue to be so in future as well”, he asserted.
Indicating some hard decisions in the offing, Mr Ahmad asserted: “Stability of the bank shall be our focus in the next six quarters. In order to improve the bottom-line growth, we may not book profits, pay dividends or taxes. There may be no new contributions to CSR spending. For the provisioning coverage ratio has to be improved at any cost as it has nosedived from more than 90 pc to merely 50 pc.”
Putting forward the approach to resolution of NPAs besides recovery in stressed assets, he said: “We are gearing up to resolve and recover the bad assets (9.3 pc) and stressed assets (10 pc), through available mechanisms like legal recourse, one-time settlements or selling them off to Asset Reconstruction Companies.
On bank’s future strategies, Parvez Ahmad asserted, “After taking stock of the situation, we have devised a comprehensive plan and re-oriented our strategies to meet new challenges. Later, in a conversation with a few select journalists, including this correspondent, he disclosed that the bank would soon engage an internationally reputed consultant for strategizing business. He said that five of the highly acclaimed bidders had been shortlisted through a competition and the final selection would be made in near future. He said that the consultant would be hired for working out a Business Plan “which integrates our Reviewed Human Resources policies and aligns its processes with the Technology Platform of the Bank”.
The centre-piece of the strategy would be moderating growth targets (10-15 pc) with asset-quality at its heart for the rest of India, while as building further upon our lending profile within the state. “For, in J&K we are more into the development of economy as a whole rather than a bank merely selling its products and services against certain returns.”
He assured the journalists that there would be marked improvement in the bank’s customer services including the upgradation in services and updating of product offerings designed to meet their specific requirements.
At his maiden press conference at the bank’s corporate headquarters, Chairman Ahmad was flanked by the Executive President Abdul Rauf Bhat and Senior Presidents Mohammad Shafi Wani and S. K. Bhat.