J&K Bank’s conversion to PSU –  A disaster in waiting!

Published at December 05, 2018 01:17 AM 0Comment(s)3288views

J&K Bank’s conversion to PSU –  A disaster in waiting!

 All the successive governments in J&K before or after 1947 desisted from interfering in the functioning of J&K Bank and allowed it to work and grow as an autonomous financial institution so that it serves the people under the laid down banking norms being followed elsewhere also. From 1947 it became all the more necessary to give it a free hand so that it comes forward to help the people of the state most of whom were the victim of abject poverty for past many centuries. The bank while taking advantage of having almost no interference from government started devising its schemes, in the first instance, to help the people involved with handicrafts, agriculture, horticulture & small-scale industries although at a sluggish pace obviously because of having available far less deposits in comparison to a huge demand for advances from the people connected with above sectors.

 Before dwelling upon how J&K Bank started emerging as a competitive bank from mid-nineties in banking sector, it is pertinent to have a cursory look on the journey of the bank since the day of its formation.

In year 1930 beginning was made when state cabinet in its meeting held on 29th September approved to have a bank of its own for the state of Jammu & Kashmir. This subsequently was followed by drafting and approving of Articles of Association. On 1st October 1938 Board of Directors at its meeting resolved and adopted the Articles of Association for the bank.

On 4th of July, 1939 when Registrar of Companies issued the certificate of incorporation, the bank commenced its regular business. After this Bank kept its operations on quite successfully till 1947 but had to thereafter face the impact of partition which resulted in surrender of its two branches located in Mirpur and Muzaffarabad since then falling on the other side of the state being under the control of Pakistan.

The bank also had to close down its Amritsar branch. To meet the obligation of payments to be made to the depositors of Mirpur and Muzaffarabad branches, bank virtually reached to a status of closure.

At this stage Government of J&K under the leadership of Jenab Sheikh Mohammad Abdullah came forward to the rescue of the bank and paid a sum of Rs 6 lacs as a grant in aid to the bank which subsequently proved a turning point, at this need of the hour, for the bank.

The bank was making a slow and steady progress till 1969 when Government of India nationalized some of the private banks and issued a direction to all banks to have their own whole time chairman.

As a follow up of this direction J&K Bank appointed Mr. Abdul Aziz Fazili as its first whole time chairman. Mr. Fazili continued to be the chairman of the bank till 1974. It is during his tenure that bank while making notable progress in all its entities also made some innovative reforms for the smooth functioning of the bank such as-:

  1. a) Formation of service rules
  2. b) Minimum qualifications required for clerks as graduates whereas in another banks qualification required was only as matriculate
  3. c) Direct recruitment of probationary officers

These and some other reforms made in the working of bank laid a strong foundation to earn the confidence of prospective clients in order to attract them to become clients of the bank needed desperately for its growth then.

Bank while progressing in all spheres started foreign exchange business for the first time in 1980 which proved s a big relief to such category of customers of the bank, who otherwise till then, had to travel to Delhi to get their job done.

In its strenuous efforts to take its banking operations ahead and to compete with other commercial banks, turning point came in the history of bank when Mr. M. Y. Khan was appointed as its chairman cum managing director in 1996.

It was for the first time that bank came out with its maiden public issue and became the only public limited company of the state. The management thereafter made strenuous efforts in inducing and attracting not only the general public but some known institutions of the country to become investors of the bank. Watching from far the progress of the bank, a good number of foreign investors also got attracted and purchased a substantial number of its shares.

Under the able leadership of Mr. M. Y. Khan, the bank not only made substantial growth in its commercial activities but made huge progress in acquiring and constructing its own non-moveable assets. Besides, having its own corporate office at Srinagar it has its own zonal offices at Srinagar, Jammu, Delhi, Mumbai etc. it has also a good number of its own branch offices.

Bank also owns residential flats at number of places in the country used for the stay of its non-local staff posted there. It is worthwhile to mention that bank also purchased the only existing Srinagar branch of a foreign bank viz Standard Chartered Bank in 2001.

Without going to the extensive details of the progress achieved by the bank, we here under give a decade wise details of its operations


Year Deposits              Advances         Net Profit       No of Offices      No of Employees

197113.54 c                4.02 cr             5.40 lac           31                                415

1981225.25cr              130.70cr          28.79 lac         250                              1719

1991 1321.04cr           690.40cr          02.48 cr           325                              4912

2001 11168.08cr         4762.89cr       167.56cr          426                              6470

2011 44675.93cr         26193.53cr      615.2cr            512                              ----

2018 80006.50cr         49816.11 cr     202.0cr            909                              10072


(** The above figures are reflective of consecutive balance sheet pertaining to theseyears)


The above are few indicators which highlight the progress and achievements made by the bank till 2018. Besides, the bank, as mentioned above, acquired the fixed assets (premises) to the tune of nearly Rs 1100 crores which is book value where as the market value could be many times more.

The operation of J&K Bank is not confined within J&K State only but is spread across many states across India. The Bank is represented by RBI since one of the Directors is appointed by RBI on the board of directors and the bank follows the advice in its working.

Keeping regard of tremendous progress of J&K Bank as shown above how could one think to convert J&K Bank as a PSU that too when we find J&K Bank miles ahead of our PSUs in its operations, financial health and deliverance towards the people of State.

Here it is important to make mention of affairs of J&K Industries, a state PSU, which owns and manages some 21 industrial ventures having advantage and access to variety of locally available raw materials with a good demand for its finished products in the state and outside.

But how it is that almost all its units are either closed for years together or suffering huge losses year after year. Its auditing of accounts is pending since 2009. To clear the salary bill of employees, it has disposed off some of its prime fixed assets also during last few years. All this is happening because of appointment of inept and nonprofessional managers in most of the cases who had no skill or experience to run these units.

This all, mostly, has been happening in these PSUs because of political interference and some other pulls and pressures.

J&K Cements, another PSU, stands almost closed despite availability of huge reserves of raw material and a good market demand for its product which is cement.

As compared to it, private sector units engaged with same activity are doing fairly well which everybody knows.

State Financial Corporation another state entity is almost at the verge of closure because of loans advanced by it has turned bad and almost no steps are being taken by state government to save this financial institution from closure which was established in early 60s to extend term loans to desirous entrepreneurs at a very lower rate of interest under refinance scheme of IDBI previously & now by SIDBI.

In the light of the comparison as arrived at above, we fail to understand as to how a proposal has been thought over to convert J&K Bank as a PSU of the state.

It is not still late for the State Governor and his administration to review the decision as otherwise it is feared that it will prove disastrous for the smooth working and health of the bank besides hampering the economic activities in general and for trade, commerce & industry in particular of the state further which are already encountered with scores of many other problems for last a few decades. However, the decision of SAC with regard to bringing in more transparency in some of the departments of the bank is viewed as a positive measure.


Article jointly compiled by A M Matoo, M.I. Shahdad and G. M. Dug - the Ex Directors of J&K Bank



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