Industrial body urges immediate government intervention to address ‘financial shortfalls’, support local businesses in J&K
SRINAGAR: The Federation of Chambers of Industries Kashmir (FCIK) has raised grave concerns over J&K Bank’s consistent failure to meet its Priority Sector Lending (PSL) targets, a shortfall it argues is stifling economic growth, job creation, and entrepreneurship development in Jammu and Kashmir.
In a strongly worded statement issued here, the apex industrial body urged the government to take immediate corrective action to protect the region’s fragile economy.
“J&K Bank, the largest financial institution in the region, is legally required to allocate 40% of its total advances to Priority Sector Lending, which supports vital sectors like agriculture, micro, small, and medium enterprises (MSMEs), education, affordable housing, social infrastructure, renewable energy, and exports. These sectors are crucial for generating employment and alleviating poverty, especially in underdeveloped areas like Jammu and Kashmir,” the FCIK said. “However, as of September 30, 2024, J&K Bank’s PSL shortfall had reached an alarming Rs 8,372 crore. This unutilized capital could have been channeled into supporting local businesses and driving economic activity, which now fears that the region’s development is being severely hindered by the bank’s neglect.”
FCIK claimed that the Reserve Bank of India (RBI) had penalized the bank for the shortfall by forcing it to park the entire Rs 8,372 crore in the Rural Infrastructure Development Fund (RIDF), a move that has led to a financial loss for the bank. “The RIDF offers an interest rate of only 2.5% to 2.75%, while J&K Bank is obligated to pay its depositors 7% to 8% on their investments. This discrepancy in interest rates is resulting in a significant financial strain on the bank,” the FCIK noted.
“Instead of supporting the region’s priority sectors, these funds are being locked away at low-interest rates, which are less than the bank’s average cost of deposits, further undermining the financial health of the institution,” the FCIK said. “Meanwhile, critical sectors such as MSMEs and agriculture are being deprived of essential credit that could stimulate economic recovery and job creation.”
The Chamber also expressed concern over the bank’s limited growth in advances, which increased by a modest Rs 690 crore, a figure far too low to meet the region’s economic needs. With Jammu and Kashmir’s economy struggling to recover from years of political instability, the need for more substantial credit flow into local industries has never been more urgent, it said.
In its statement, FCIK emphasised the responsibility of the J&K government, which is the majority shareholder in the bank, to intervene and ensure that the bank meets its PSL obligations. The Chamber has also called on the state government to address the alleged “insensitive” approach of the bank’s management and board, noting that their continued failure to adhere to PSL requirements is a direct blow to the region’s economic future.
“The government must act swiftly to address this issue,” the FCIK said. “The continued neglect of priority sector lending is not just a financial oversight; it is a direct assault on the economic development of Jammu and Kashmir. MSMEs, agriculture, and other key sectors are unable to access the funding they need to survive, leading to closures, layoffs, and an escalating economic crisis.”
The FCIK also claimed the lack of support for MSMEs, many of which have been unable to restructure their loans and are being unfairly classified as Non-Performing Assets (NPAs) by the bank. “Had the bank followed directives from the Union government and RBI, many MSMEs could have been given a lifeline through restructuring. Despite a Supreme Court ruling in August 2024, which mandated adherence to these directives, J&K Bank has continued its “name and shame” policy against small businesses, exacerbating the crisis,” it said.
The Chamber also raised concerns about aspiring entrepreneurs who are allegedly being denied access to credit. “Despite government-backed schemes designed to support emerging small businesses, the bank continues to insist on collateral and personal guarantees, which many entrepreneurs simply cannot provide,” it said.
In addition to addressing PSL shortfalls, the FCIK has called for a comprehensive review of J&K Bank’s operational and financial practices. The Chamber highlighted “discrepancies” in the bank’s financial reports, particularly adjustments that “appear to be aimed at presenting a more favorable profit outlook”.