A Lopsided Story

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District level performance of banks across J&K offers a story least talked about. Kashmir and Jammu offer two extremes to banking story in which the Valley seems to be earning for Jammu that has vast populations hitherto unbanked, analyzes R S Gull

bankIt is not energy alone that witnesses bulk of it getting consumed by the twin capital cities of Srinagar and Jammu. It happens on all fronts and it has just one reason: lot of people live in the two cities – nearly two million each including the floating population. Population is key to economies of scale and that is why most of the businesses are based in the two cities.

Banking also exhibits the same trend. By the end of September 2013, the twin capital cities had the lion’s share of 53.35% of Rs 66223.28 crore that is deposited with all the banks in J&K. At the same time, they availed 49.02% of total credit which is at Rs 26802.26 crore. It may offer a totally disproportionate per capita, in comparison to the people living outside Jammu and Srinagar cities,  on both the major parameters that make the banking but that is the trend and it is not endemic to J&K.

But if there is a comparison between the two cities, Jammu seems to be doing better than Kashmir.

Firstly, it tops all the 22 districts as for as banking infrastructure is concerned. It has whopping 359 branches of all banks. It means it has nearly 100 bank branches more than the banking network of districts of Poonch, Rajouri, Doda, Kishtwar, Ramban, and Reasi put together.

The main factor that is behind a better banking infrastructure in Jammu is the turmoil in Kashmir. As most of the nationalized banks closed their shutters in Srinagar, they fled to Jammu. Though most of them have returned after a decade long stay, they do not see Jammu a fair-weather station unlike Srinagar.  But see it as state’s economic capital. From regulator RBI to agriculture promoter NABARD to state banker SBI, all the banks are headquartered in Jammu. They operate their Srinagar shops through cooks and clerks.

At one stage, the government had raised demands that banks must restore their pre-1990 status. It would have essentially meant that all the banks would move their state epicenter to Srinagar. After witnessing the reluctance at institutional level, the demand does not figure in banking conclaves or political meetings. Now all the private banks have their regional heads operating from Jammu.

Secondly, existence of elaborate banking network means more job opportunities. If the back room offices are taken care of, Jammu has nearly double the number of people serving banking sector than Srinagar.

Thirdly, Jammu is wealthier than Srinagar. It has more money parked with banks than Srinagar. By the end of September 2013, Jammu topped all the districts across the state with highest deposits of Rs 21003 crore. Banks pay interest for deposits and it has an edge over all other places in the state.

Fourthly, Jammu witnesses less credit absorption than Srinagar. By September 2013, total advances in Jammu district were of the order of Rs 6608 crore. Banks earn from loans, its assets. That means banks earn less from Jammu.

Fifthly and most importantly, if Jammu district is seen in the regional context, then it leaves not much to its periphery in the region. Jammu district owns 59.67% of Jammu region’s total money deposited with the banks and avails 60.68% of the overall credit. It means the progress, prosperity and development is disproportionately managed in Jammu region.

JKBank-Districtwise-branch-detailSixthly, Jammu is the only district in the state that has reposed lot of trust in Regional Rural Banks (RRBs) as compared to other districts. Jammu has more deposits with RRB than all Kashmir put together. It has Rs 1039.09 crore with RRBs and entire Kashmir valley has Rs 984.77 crore with them. That is perhaps why J&K Bank managed J&K Grameen Bank is headquartered in Jammu.

Srinagar is slightly a different story. The banking sector was literally uprooted by the militancy and was resurrected only after the J&K Bank was rediscovered from the margins of the economy and encouraged to the be sole master of the game. With the trust, that is fundamental to the banking, gone over the years, the players had to rebuild it literally brick by brick.

State’s summer capital has slightly more than half of the bank branches than Jammu. It is 196/359. Compared to Jammu Public sector banks having slightly more than one third of their branch network in Srinagar only speaks part of the story. It is only the private sector banks that make the difference in the overall scene in Srinagar and credit goes to J&K Bank that dominates the space.

In the overall ranking, Srinagar plays second fiddle to Jammu by way of deposits. It has Rs 14329 crore parked with the banks. Compared to its deposits, Srinagar is exhibiting a huge credit appetite. By the end of September 2013, the first half of the current fiscal, it had overall credit off take of Rs 6532 crore which means it loaned more than Rs 45 against a deposit of Rs 100 which is huge, if compared to Jammu that has a credit-to-deposit ratio of 31.46 per cent, one of the lowest by industry standards.

Srinagar’s centrality to a homogenous Kashmir region apart, the city control 55.32% of total Rs 25900 crore that Kashmir has parked with banks. It only accounts for 44.97% of the overall credit off take in the region.

All these parameters paint a story for Srinagar suggesting that it is less benefitted on the services front that banks create. Cumulatively, it returns more than half of the money to banks that it earns as interest on its deposits.

And finally, Srinagar lacks the hegemony that Jammu has in the region. The business is spread around unlike Jammu. Baramulla has 143 bank branches and Islamabad 117 unlike Jammu where there is no peripheral district than can have such a network. Branch network is indicative of the business and opportunities. Only the industrial district of Kathua has 94 branches but the gap with Jammu is unbridgeable which is not the case in Kashmir.

Banks earns more in Kashmir region than Jammu. All the 10 Kashmir districts have high CD ratio. In Kashmir, it is the Srinagar district that has the lowest CD ratio – 45.59.

Interesting part of the story is that state’s smallest district Shopian that has Rs 426.56 crore deposits avails a credit of Rs 584.52 crore which makes a CD ratio of 137.04%, the highest in J&K. For laymen, it means the banks get money from other districts to deploy in Shopian because it has a huge appetite for funds.

Shopian actually is part of the larger apple story. It is this fruit that is the mover and shaker of most of Kashmir periphery and banks have their huge pie in it. Kulgam has a CD ratio of 71.71%, Pulwama has 75.96%, Baramulla has 73.25% and Budgam has 71.23%.

Contrary to this scenario, Jammu is an under-serviced story. Of the 10 districts, nine have low CD ratio as the industrial Samba district has the best ratio of 50.30%. Poonch, Kishtwar, Rajouri, Doda, Ramban, and Reasi have not even reached 25%. They deposit their earnings with the banks but do not seek loans or simply are not bankable.

Interestingly, the region has a better relation with the public sector banks. Udhampur, for instance, has more money parked with public sector banks than private banks. It is Rs 1026.84 crore versus Rs 951.93 crore. This is despite the fact that private sector banks contribute more to sprawling district’s credit requirements than the nationalized banks.

But there are many people who believe the consistent instance of Mata Vaishno Devi Shrine Board, based in Katra, to have its earnings parked with nationalized banks than state owned J&K Bank is the main factor responsible for the lopsided picture. Parking of daily earnings by pilgrims is an interesting story. The SMVSB has opened accounts with all the banks including J&K Bank. While most of the money is deposited with the nationalized banks and non-local private banks, the coins – which are sometimes in millions and require trucks, are being deposited with the J&K Bank. Sometimes, the J&K Bank requires many times more capital for transporting and counting these pennies than it could ever earn from it. But that is besides the point.

Ladakh is the same old story. Climatic conditions are main factors responsible for its low credit off take. But the larger story is Leh has more than double the money in its coffers than Kargil. Credit is the same 1:2 story.

But what are the trends that current credit absorption offers across J&K’s districts? It is an interesting story. In the first half of the current fiscal 2013-14 ending September, all the banks have cumulatively advanced Rs 5607.49 crore of which Rs 3287.83 crore was absorbed by Kashmir, Rs 2203.27 crore by Jammu region with balance Rs 116.38 crore going to Ladakh region. It is the entire credit under priority and non-priority.

Srinagar tops 22 districts by absorbing a credit of Rs 1272.66 crore followed by Jammu with Rs 1156.24  crore. For the peripheral districts, Baramulla tops with Rs 505.89 crore, followed by Rs 345.90 crore by Islamabad as Jammu’s Kathua is third with Rs 340.72 crore.

If the credit is taken on basis of sectors, Baramulla and Shopian – the two apple belts of Kashmir, topped in absorbing agriculture credit with Rs 159.42 crore and Rs 149.02 crore, respectively.

In medium scale enterprises (MSE), another priority sector area, Jammu tops with Rs 269.05 crore followed by Srinagar with Rs 204.79 crore. For educational loans, Jammu got Rs 18.76 crore and Srinagar finished second with Rs 14.13 crore. On the housing front, Srinagar tops housing loans with Rs 314.21 crore and Jammu Rs 118.30 crore.

Kathua topped in heavy industry under non priority industrial credit with Rs 115.86 crore followed by Srinagar with Rs 112.05 crore. In medium industry area, it is Samba on top with Rs 21.80 crore and, believe it, Ganderbal following with Rs 12.71 crore.

(Editors note: This copy is in continuation with the half yearly review that Kashmir Life published last week. The figures used in the copy and the illustrative boxes were last updated in September 2013.)

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