SRINAGAR: Finance Minister, Dr Haseeb Drabu, On Thursday said the Jammu and Kashmir State Financial Corporation (J&KSFC) should be turned into an Asset Reconstruction Company (ARC) for purchase of bad loans from various financial institutions operating in the state.
Drabu, who was speaking at the 55th Annual General meeting of shareholders of J&KSFC, said the move would go a long way in improving credit flow into the state.
“There are around 45 banks and financial institutions and majority of them are not lending enough. So let us reinvent the corporation into an ARC that will purchase the bad loans from these banks and relieve them of the burden. This in turn will encourage banks to increase their advances in the state,” he said.
“The ARC shall have exclusive access to a sustainable non-fund based income model. Some of the SFCs, like that of Karnataka, have successfully implemented this model.”
Advising an immediate turnaround and as a future business strategy, the FinMin said the corporation has a golden opportunity to explore.
He said the corporation can speed track its own recovery processes and also reinvent itself as an ARC. The proposed ARC, he said, can turn these impaired assets into successful units.
“After the economic meltdown in South East Asia, governments heavily invested in bad assets and turned them around. It became the basis of their economic boom,” he said. “Same model can be applied here, and it will also unlock around Rs 1,000 crore in our blocked assets.”
Drabu said the state government is currently looking at creating a new Financial Architecture in the state.
“The corporation needs to find out the right mix of strategy and space for itself that it can relate to, compete with and complement the activities of other financial institutions operating in J&K,” he said.
To make the corporation more independent, Drabu advocated minimising the government’s share in it from 70 to 51 per cent.
“Let the management sit around the drawing board and create a roadmap for the organisation. Then government will step in to create an institution of global standards out of the Corporation,” he said.