Seeks UT govt’s intervention as major stakeholder in J&K Bank
SRINAGAR: The Federation of Chambers of Industries Kashmir (FCIK) has reiterated its long-standing demand for immediate intervention by the Government of Jammu and Kashmir to facilitate a one-time, structured and humane resolution of Non-Performing Assets (NPAs) and stressed accounts of sick MSMEs, most of which have been pushed into distress due to circumstances beyond the control of entrepreneurs.
FCIK, in a statement issued here,said that credit flow to the industrial sector in Jammu and Kashmir has remained severely constrained since 1989, when most of the 47 banks and financial institutions operating in the region either closed down or curtailed operations, leaving J&K Bank as the primary source of institutional credit. This near-monopolistic situation resulted in interest rates 3–5% higher than pan-India averages, rigid collateral requirements, and an abnormally low credit-deposit ratio for MSMEs.
While acknowledging the visible shift away from the earlier “name and shame” policy under the incumbent leadership of J&K Bank, FCIK expressed concern that SARFAESI and e-auction notices continue to appear regularly in local dailies, with little regard for the social stigma, psychological stress, and reputational damage caused to entrepreneurs who defaulted due to prolonged instability, lockdowns, delayed government payments, natural calamities, and economic disruptions spanning over three decades.
FCIK recalled that after assuming charge, the Managing Director of J&K Bank had assured the Federation of a concrete and durable resolution, including the launch of a Special One-Time Settlement (SOTS) scheme and strict adherence to the RBI Framework for Revival and Restructuring of MSME Accounts and Government of India guidelines, which have been held to be mandatory by the Hon’ble Supreme Court before declaring MSME accounts as NPAs.
Simultaneously, the UT Government constituted a high-level committee under the Chairmanship of the Principal Secretary, Finance Department, with the Commissioner/Secretary Industries & Commerce and the Executive Director of J&K Bank as members, to devise a foolproof solution to the chronic NPA problem. However, FCIK noted with concern that the committee is yet to deliver tangible outcomes, even as coercive recovery actions continue on the ground.
FCIK emphasized that mere delay of three installments should not automatically result in MSME accounts being classified as NPAs, followed by action under Sections 13(2) and 13(4) of the SARFAESI Act. Enterprises invest both borrowed funds and their own capital in fixed assets, machinery, and raw material; demanding immediate recovery of funds locked in such assets is economically unrealistic and administratively unjust.
Now that both the Government and J&K Bank appear aligned on resolving the NPA backlog through a Special OTS and other measures, FCIK demands an immediate moratorium on coercive actions, including SARFAESI notices, e-auctions, sealing of units, filing of recovery suits, and engagement of recovery agents. The Federation stressed that SOTS must precede enforcement, not follow it, to avoid unnecessary litigation, mental distress, and avoidable business closures.
FCIK reiterated that it will ensure full compliance and settlement by MSMEs under its fold, provided the Bank adopts a cooperative approach and the settlement framework is fair, uniform, and non-discriminatory. Such a settlement would unlock substantial funds currently blocked in NPAs for the Bank, while giving stressed enterprises a dignified exit from legacy debt — even if it requires liquidation of personal assets.
The Federation categorically stated that SOTS must not be linked to mortgage value, particularly because MSMEs were historically forced to mortgage ancestral homes and personal properties multiple times due to lack of alternative credit options and the monopolistic credit environment prevailing in the region post-1989. Excessive collateralization cannot now be used as a punitive recovery instrument.
FCIK further pointed out that MSMEs in Jammu and Kashmir were already burdened with higher interest rates (3–5% above national averages) during turbulent years, ostensibly to cover “market risk”. These factors must be accounted for while determining principal haircuts, which should be aligned with the average concessions granted to enterprises outside J&K over the past decade under various settlement mechanisms.