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| J&K Bank headed for major crisis as alarming rise in NPAs | | Officials of state's 'apna bank' serve rich defaulters, punish poor | | Hyder Ali
Early Times Report
Srinagar, May 9: The J&K Bank is headed for a major crisis in wake of alarming rise in Non-Performing Assets (NPAs), which are feared to touch Rs 4,000 crore.
While the balance sheet for year ending March 31, 2016 is yet to be made public, sources said its release would open Pandora's box for the bank and state as well, as the government has 53.17% stakes in the premier financial institution.
The NPA rose alarmingly from Rs 783 crore in 2014 to Rs 2,764 crore in 2015, while the upcoming statement is feared to expose record rise in "bad loans".
Sources said uncontrolled lending of loans worth crores of rupees to the influential people who fail to clear the debts has been a major cause for the rise in the NPAs, something which tells upon the financial health of the bank.
Sources said in the past over 25 years of conflict, the bank officials had "developed a habit of not declaring the NPAs properly, only to keep their political masters in good humour."
Finally in March 2014, the J&K Bank tumbled 13.93% to Rs 1,584 at 13:38 IST on BSE after a media report alleged that some of the directors and officers at the bank were not declaring all the non-performing and stressed assets in its loan book.
Though subsequently the bank started declaring more and more NPAs on the loan book, sources said not all the rot was made public. "Political patronage of successive regimes, which the bank top brass enjoyed from time to time has been the major reason of this sweeping under the carpet... Basically most of the loans were given on political patronage," explained a bank insider, asking not to be named.
In a bid to hide the rot of "bad loans", the bank top brass was again planning not to declare most of the NPAs in the financial statement. But there came a twist in the story earlier this year when state was under Governor rule and reports surfaced that liquor baron Vijay Mallya was defaulter with the J&K Bank.
In late 1990s, during the then Dr Farooq Abdullah regime, Mallya was granted over Rs 100 crore loan from J&K Bank. Out of the total of Rs 105 crores doled out to the beleaguered Vijay Mallya-led Kingfisher group, the J&K Bank, as per insiders, is yet to retrieve over Rs 3.5 crores.
Two months ago, prompted by media reports of Mallya going bankrupt, Governor NN Vohra, who was that time ruling the state, smelt a rat in the deals. And the bank came under scanner.
This put the bank top brass in tight spot as they couldn't find any "political saviours" during the Governor's rule, when the state witnessed unusual "peak of efficiency and accountability", with scope for excuses like "Uncle or Sorry".
That time, amid uncertainty of government formation, the bank officials preferred to "discover" the NPAs, which over the years had been kept undisclosed.
Source said the figures were shocking. A single business house owed Rs 70 crore to the bank and had not paid a penny for around two years while it was yet to be declared NPA.
"As new figures of NPAs started to consolidate, the gross total was pegged to touch Rs 4000 crore mark," said an insider, adding the final picture would be clear in the coming days as the financial statement was being audited by the Comptroller and Auditor General of India.
But as per the insiders, many of the influential are still being spared. "There are a lot more companies that should be declared NPAs but have not yet been declared NPAs," said the insiders.
The large scale irregularities at J&K Bank are nothing hidden but officially endorsed. Earlier this year, the Divisional Commissioner, Kashmir, Dr Asgar Hassan Samoon minced no words to publically expose the dirty underbelly.
On March 11, while addressing an event hosted by Silk Route Group for a startup, Samoon alleged that J&K Bank distributed loans to 'blue-eyed boys' of politicians despite knowing that they would never be returned and the accounts would become NPAs.
Samoon said the J&K Bank, considered to be the state's premier financial institution, lacked vision for investment and representatives from the business community and young entrepreneurs should be part of its policymaking body. The senior-most bureaucrat from the Kashmir Valley also said that the bank spends corporate social responsibility money 'to make politicians happy.'
The RBI has given a deadline of March 2017 for all banks to clean up their balance sheets, which also require these lenders to set aside huge chunk of capital in the form of provisions. RBI governor RaghuramRajan has given a clear message to banks to deal with the NPA problem upfront, instead of postponing it and worsening it.
But then, while J&K Bank is a blessing for the "influential", common man down the street complains of being "unheard bank customer." "If a poor shopkeeper is a defaulter, J&K Bank instantly humiliates him through public notifications which have his picture in newspapers, whereas if some influential fails to pay back crores, he is secretly called for negotiations in cozy rooms," said Sajada Begum of old Srinagar.
Traders of Srinagar said they have been victimized the most. "They (J&K Bank officials) were bound to insure our mortgage assets(shops). But when 2014 floods devastated our assets we got to know that nothing was insured. Despite this criminal negligence, they failed to redress our grievances, rehabilitate us" complained Rafiq Ahmed, a flood victim leading over 100 flood affected traders, who recently staged protest at the Press Enclave here. "J&K Bank is making the rich richer and the poor poorer," the victims shouted.
Another major issue is that the bank lacks accountability, which the historic Right to Information Act has empowered the people of the country with. The bank rejects RTI applications pleading that it doesn't "fall in the ambit of the act."
Besides in the e-age, the grievance redressal system looks so poor that there's no dedicated email ID or online form system to cater to such complaints on the J&K Bank portal.
As if this all was not enough, the J&K is accused of paying no heed to collective sentiments of the people of the state. In February, news hogged the headlines that the iconic Grindlays Bank building, owned by J&K Bank, on the Srinagar Bund would be vandalized as its repairs were being undertaken without nod from INTACH, a national organization dedicated for conservation of heritage assets.
Though subsequently an online petition was filed on Change.org, with people from across the globe, including US and England demanding conservation of the heritage building, the bank officials didn't even bother to respond to public concerns. "This is height of arrogance in this bank and a reason why people of Kashmir now prefer transactions with other banks," said a retired bureaucrat.
Amid this mess of sorts, "steep rise" in NPA has only jeopardized the stakes of various stakeholders. Financial experts opine that Union Finance Minister Arun Jaitley and RBI Governor RaghuramRajan should personally look into the matter.
Though J&K Bank Chairman Mushtaq Ahmed could not be contacted for comment, the bank officials refuted the allegations over NPA. "Nothing can be said as of now, till the financial statement is released at the AGM scheduled for June... But NPA is not the issue. If you look at performance of the other banks in the country, our performance is much better," the official told Early Times. |
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