JK to establish Panchayat Bank

Published at February 06, 2018 03:09 AM 0Comment(s)2964views

Move aimed at cooperatives, rural banks’ revival


Faisul Yaseen

Jammu, Feb 5:

As the regional rural banks and cooperative banks continue to be in a bad shape, the government has decided to give a flip to them by establishing a Panchayat Bank and linking it with the local bodies.
“We are building a new financial architecture for Jammu Kashmir,” Finance Minister Haseeb Drabu said in an interview to Rising Kashmir at his Jammu residence.
He said the State Finance Corporation (SFC) had been rendered redundant and the new financial architecture would comprise of the commercial, regional rural banks and cooperative banks.
“The cooperative banks will be linked to all the Panchayats in the State,” the finance minister said. “This will be the new Panchayat Bank.”
The rural and cooperative banks in the State are in a bad shape with Non Performing Assets (NPAs) of around 20 percent and16 percent.
One of the major reasons of why NPAs of these banks had grown is their inability to seize the properties and take action against the defaulters under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.
SARFAESI Act allows the banks to seize the properties of the defaulters and auction without any court process.
Although the SARFAESI Act was passed in 2002, when banks sought to use it, many defaulters challenged it in the court on the pretext of Article 370 that accords a special status to Jammu Kashmir and debars most Government of Idnia laws from being enforced in the State unless they have been endorsed by the State government too.
In December 2016, the Supreme Court, while responding to an appeal by the State Bank of India (SBI), said the act did not need the State government’s concurrence to be enforced.
Following this, the State government and J&K Bank set up an Assets Reconstruction Company, with the government holding 51 percent stake.
The State government would buy the stressed assets of defaulters from banks and ensure the ownership of these assets remains within the State.
Currently, besides the regional rural banks and cooperative banks, the most successful bank in the State - J&K Bank also has massive NPAs of around Rs 900 crore.
The government sees setting up of the Panchayat Bank as a move aimed at the revival of the cooperative and regional rural banks.
faisul@risingkashmir.com


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