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J&K Bank’s profitability tied to local support, says FCIK

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· Warns of risks to bank’s future if it continues to ‘alienate’ local customers
· Calls for government intervention to improve relations

SRINAGAR: The Federation of Chambers of Industries Kashmir (FCIK), the valley’s leading industrial chamber, has urged J&K Bank to prioritize building long-term loyalty among local customers, emphasizing that the bank’s profitability hinges on this relationship and is crucial for its sustainable growth.
FCIK in a statement issued here attributed the bank’s profitability primarily to depositors and borrowers from the J&K region, warning that losing their support could jeopardize the bank’s future. It said that out of total deposits of Rs 137,918 crores, a substantial Rs 123,000 crores—approximately 89%—originates from the J&K region.
“The Current Account Savings Account (CASA) ratio has given J&K Bank a competitive edge, with 48.60% of its deposits coming from ‘no-cost’ or ‘low-cost’ current and savings accounts,” FCIK stated. However, it also pointed out that current account holders incur charges for various services despite receiving no interest from the bank.
FCIK highlighted that the cost of deposits for J&K Bank remains the lowest among Indian scheduled commercial banks, standing at 4.4% for the financial year 2023-24. This is a slight increase from previous years, where the cost of deposits was 3.8%, 3.65%, and 4.10% for the financial years 2022-23, 2021-22, and 2020-21, respectively.
The chamber credited the bank’s success to its majority government ownership and its role as the agency bank for the Union Territory of Jammu and Kashmir, which has helped it consistently attract retail deposits, including government-related transactions like employee salaries.
With loans and advances totaling Rs 96,139 crores, FCIK emphasized J&K Bank’s reliance on local borrowers, with approximately Rs 66,000 crores, or 68.5%, coming from the region. Notably, around Rs 23,000 crores—24% of the overall portfolio—consists of retail loans granted to local employees, all secured by government guarantees.
While acknowledging that J&K Bank has been the sole financial lifeline for local businesses since the turmoil began in 1989, FCIK expressed concern over the often unfavorable terms of these loans. “Many loans for the local business community have required increased collateral and guarantees, disregarding the collateral-free schemes launched by the government,” the chamber stated.
FCIK also raised concerns about the higher interest rates charged to borrowers, which are significantly above those of banks across India, citing the volatile law and order situation and market risk coverage as reasons. For example, the poultry industry has been overcharged by 4-5%.
Despite these challenges, the bank’s Non-Performing Assets (NPA) ratio has dropped significantly to 3.95% from 8.7% in the financial year 2021-22, a change attributed to local borrowers’ determination to repay loans, often at great personal cost.
However, FCIK has called for clarity on the NPA reduction, especially given reports of substantial loans outside the Union Territory being written off due to their unsecured status.
The chamber cautioned that the bank’s coercive practices and anti-customer approach are alienating loyal clients, with many already switching to other banks. FCIK warns that the bank faces significant risks if it loses local customer support, which is essential for its survival.
Looking ahead, FCIK is urging the newly appointed Omar Abdullah government to intervene in J&K Bank’s operations to restore local loyalty and address pressing issues. The chamber stressed the need to end coercive practices and highlighted the importance of including locals in top positions and on the board to strengthen ties with the community.

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