JK Bank in banking industry We need to set the record straight before we make conclusions about the bank Indian economy has been hit by recession impacting the business growth. In terms of its annual performance, the J&K Bank’s deposits have increased from Rs.64.221 thousand crore from March, 2013 to Rs.69.336 thousand crore in March 2014, registering an annual growth of about 8 percent. On the other hand, the performance (real business growth) is revealed by increase in advances from Rs.39.200 thousand crore in March 2013 to Rs.46.385 thousand crore in March 2014, registering an annual growth of 18.33 percent. The credit-deposit ratio of the bank under reference stands 66.90 (March 2014), the highest, in relation to other banks, in the State as compared to 61.92 (March 2010). The total investments of the bank increased from 25.741 thousand crore to26.195 crore from March 2013 to March 2014. Among the critical parameters, the net interest margin (NIM) which was 3.04 in 2009-10 rose to 4.14 in March 2014, a significant achievement, while the credit-deposit ratio increased to 66.90 in March 2014 from 58.63 in 2010-11. In respect of the bad loans, the non-performance assets, the gross NPA stood 2.64 percent in March 2009 and is sizably reduced to 1.66 percent by March 2014. Among the other efficiency parameters the business per employee in March 2010 stood Rs.774.10 lakh as against Rs. 11.00 crore in March 2014 and business per branch stood Rs 112.49 crore in March 2010 as against Rs.148.17 crore in March 2014. As per RBI stipulation banks are required to keep at least 70 percent provision for bad loan or NPAs popularly called NPA coverage ratio. While most of the banks maintain the 70 percent coverage ratio, the J&K Bank’s coverage ratio was 86.09 percent of NPA in 2010 and the same stands 90.30 percent in 2014. The balance sheet of J&K Bank for fiscal 2013-14 has undergone a rigorous scrutiny process at the hands of auditors appointed by CAG, Audit Committee of Board and finally there is final RBI inspection. The statutory audit team did not find any NPA account except the declared bad loans amounting to Rs.783.42 crore, lowest in the banking industry today. The rating of the Bank has significantly improved since 2010 particularly in critical management sectors of the Bank; therefore, it is not possible to evade scrutiny from robust audit mechanism. It is surprising to find in a write up (GK26th June) that the author builds his castle on the assumption that “GK report is correct, the total NPAs of the Bank are around Rs. 2300 crore of which Rs. 800 crore are declared and Rs. 1500 crore undeclared”. According to recent RBI estimates,…”with present conditions continuing, the gross NPA (non-performance assets) in the system will rise 4.6 percent by September, 2014 from 4.2 percent in September2013 or to about Rs. 2.29 trillion from Rs 1.67 trillion a year earlier”. And public sector Bank’s total bad loans or NPAs stands 5.5 percent. As on 31st March, 2014 once rigorous audit mechanism declare nonperforming accounts of the Bank amounting to Rs 783.42 crore and certify the balance sheet of the fiscal there is no headroom available to concoct or imagine accounts as NPAs. The auditors are professionals and have huge professional stakes for committing an error. Further, it is followed by an annual financial inspection by RBI. According to the author as far as capital adequacy ratio is concerned, the Bank has already implemented Basel III and capital adequacy ratio based on Basel III for the bank stands 12.69 percent as against RBI stipulation of 9.00 and on Basel II norm the Bank’s CAR stands 12.91. It is equally pertinent to mention that RBI has put a moratorium of one year on Basel III and is deferred by a year to give more breathing time to Banks. The Bank carries stress test exercises frequently and while examining the risk weighted capital adequacy, the stress test confirm that the Bank’sCRAR is far above the required minimum prescribed by regulator. The Bank may need fresh capital infusion in view of its envisaged high business growth trajectory and not for its impaired assets or potential NPAs. It is the general public which stands testimony to the fact that when Former Finance Minister Mr P. Chidambaram addressed as Chief Guest on Platinum Jubilee in SKICC re-confirmed the financials of J&K Bank from its CEO while sitting on the dais and urged upon the Bank to open up its business overseas precisely because Bank’s performance, strong financials and robust efficiency parameters in entire banking industry. That is reason for commendations of former F.M for the Bank. The author needs to appreciate and not to be cynical on Indian Finance Ministers admiration. The author’s knowledge of banking and prudence is well demonstrated by his sanctioning of credit exposure to Kingfisher Airline, grounded today, and subsequently recovered by the Bank with the genius of management and the wisdom of leadership. Yet, in another write up (GK May31) wherein the concern is expressed regarding” the facts about J&K Bank’s loan portfolio, especially lending outside the state are very disturbing”, while appreciating the bank as “ our national asset and of paramount importance to us” , it is equally important to know the structure of our regional economy of J&K State which has limited capacity, at present, as far as off take of loan-able funds or credit absorption is concerned. The potential investment-intensive sector is power. Unfortunately the administrative red-tape and hassles, requisite private investment policy and technical bottlenecks are deterrents for entrepreneurs to invest and demand for credit, hence Banks are compelled to find outlet for liquidity outside the domestic market. The Banks in the state have failed to comply with RBI stipulation of 18 percent credit to priority sector-agriculture. The J&K Bank has achieved the target to the extent of 12-13 percent. It is impossible for banks operating in J&K State to comply with the said RBI norm because agriculture is a losing proposition in the state. Under the said scenario while the share of J&K Bank in total business has been 65 percent in the state, that is, just one-third by other banks, its share in agriculture priority sector lending has been more than 62 percent. As much as 92 percent of arable land is below sub-marginal holdings and the farms in the relevant category are presently under distress sale, hence credit demand is bound to be very low. While public concerns for institutional functioning are appreciated a due care has to be taken when one writes on sensitive institutions like financial, judicial and academic. The Bank under reference being a listed company is the public trust and has a major role in the development of this region. The other corporation is in the process of being considered as listed company-the power Development Corporation and these two corporate are the only catalysts to build future the state.
Posted on: Mon, 07 Jul 2014 09:51:44 +0000
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