Apart from employing around 20 thousand people directly, the banks operating in J&K are the backbone of state’s surging consumer market. Their performance in 2010-11 has been average by the standards they have evolved and many in the sector say the 2010 turmoil was a spoiler. R S Gull offers a toasted guide to the performance of the sector.
Numbers: Currently 34 banks including 20 nationalized banks operate in J&K through a network of 1302 branches including 695 in the countryside. The number of branches that remained stagnant for a long time for varied reasons has increased by 50 branches in the year ending March 2011. The J&K Bank leads with 448 branches, followed by J&K Grameen Bank with 176 branches and State Bank of India with 148 branches. Elaquai Dehati Bank falls at the fourth place with 111 branches.
The Vault: By March 2011, banks in the state had cumulative deposits of Rs 45694.63 crore which means a net increase of Rs 7454.99 cr in one year. The deposits had increased by Rs 5562.245 cr in the year ending March 2010. J&K Bank holds deposits worth Rs 28842 cr followed by the SBI that holds Rs 6386 cr and Punjab National Bank with Rs 2862 cr.
The Loan Book: The entire sector had advanced Rs 16252 cr by the end of March 2011. Of this Rs 10964.60 cr belonged to J&K Bank. The net outstanding of the nationalized banks into the state was only Rs 3600 cr. It includes Rs 3049 cr that banks lent under priority sector and Rs 1584.71 cr under non-priority sector which were advanced in 2010-11. It essentially means the banks performed better on recoveries as they restricted lending during the year. The overall advances in the state were at Rs 17117.66 cr in March 2010 and Rs 14982.65 cr in March 2009.
CD Ratio: Conservative advances during the year dipped the credit-deposit ratio for the entire sector to phenomenally low at 35.57 percent. As compared to March 2010, it meant a fall by 9.19 points and a nosedive of 10.18 points if compared to the CD ratio that the banking sector had in March 2009. Though there were marginal differences in the CD ratio of nationalized banks and cooperative banks, the actual fall was reported in the private sector banks that include J&K Bank, HDFC bank, ICICI and Axis banks which cumulatively witnessed a fall of the ratio from 52.09 to 37.57 percent. The benchmark for the CD ratio in India’s banking industry is 60 percent.
Priority Sector Lending: Advances that go to agriculture, retail trade, education, housing, micro-credit and sponsored schemes is classified as priority sector. All other commercial activities fall in the non-priority sector lending. Every year banks fix a target for priority sector lending, the implementation of which is being reviewed and monitored by the state government and the state level bankers committee almost every quarter. In 2009-10, banks advanced Rs 2667.16 cr against a target of Rs 2301.30 cr. Last fiscal, they gave credit of Rs 3049.09 cr against a target of Rs 2820.19 cr.
For the fiscal 2011-12, banks have set the target of Rs 3274.14 cr – Rs 1690.18 cr in Jammu region, Rs 1509.80 cr in Kashmir region and Rs 74.16 cr in Ladakh region.
In the implementation of the 2010-11 annual credit plan, J&K Bank had the lion’s share of Rs 2098.20 cr followed by SBI’s Rs 241.04 cr. Region-wise, Jammu consumed Rs 1572.58 cr, Kashmir Rs 1431.39 cr and Ladakh Rs 45.13 cr of credit.
An analysis of the cumulative credit in the state suggests that overall cumulative priority sector lending in the state stands at Rs 10107.44 cr and in the year 2010-11 makes almost 62.19 percent of the overall credit dispensed in the state. The benchmark for the industry is 40 percent. Interestingly, the increase in the priority sector lending percentage in the total credit essentially means the banks have squeezed the routine commercial credit that falls outside the priority sector.
Agriculture: Against the target of Rs 673.48 cr to the sector, the banks ended up offering only Rs 564.44 cr. It includes Rs 138.76 cr under crop loan. Kashmir got Rs 293.73 cr, Jammu Rs 268.04 cr and Ladakh Rs 2.68 cr. Overall credit outstanding to the agriculture sector was at Rs 1648.37 cr (11% of total credit in state) in March 2009, Rs 1983.97 cr (11.59%) in March 2010 and Rs 1931.67 cr (11.89%) at the end of March 2011.
Small Enterprises: Banks offered only Rs 1142.58 cr against the target they had set for the year at Rs 1430.64 cr. Kashmir got Rs 458.05 cr, Jammu Rs 647.61 cr and Ladakh Rs 36.92 cr. Overall credit outstanding to the SME sector was at Rs 2431.73 cr (16.23% of total credit in state) in March 2009, Rs 3081.79 cr (18%) in March 2010 and Rs 5319.34 cr (32.73%) at the end of March 2011.
Micro-credit: Banks fell short of implementing their own targets. Against Rs 454.27 cr, they actually advanced only Rs 231.09 cr. Kashmir got Rs 72.11 cr, Jammu Rs 157.30 cr and Ladakh Rs 1.68 cr.
Education: A very crucial area of human development in which they should have performed better, the banks have not had an encouraging implementation. Against a target of advancing Rs 80.75 cr to 3544 students, the banks ended up extending the loan facility to only 3278 students to the tune of Rs 63.17 cr. The loan being availed by students at comparatively less rate of interest is being returned once the education is over and the candidate is employed. Kashmir got Rs 30.36 cr, Jammu Rs 32.51 cr and Ladakh Rs 30 lakhs.
Housing: This seems to be the main bread and butter for the banks in the priority sector apparently because it had adequate collaterals available to them as mortgages. In the last fiscal, banks were supposed to advance Rs 181.77 cr to 5282 individuals so that they construct their houses but eventually the banks ended up offering Rs 1047.82 cr to 41909 individuals in 12 months ending March 2011. Interestingly, Kashmir consumed Rs 577.14 cr, Jammu Rs 467.12 cr and Ladakh Rs 3.55 cr.
Sponsored Schemes: Banks under the law of the land are tasked to fund a number of schemes aimed at self employment, poverty alleviation, and other livelihood ventures. These include Swarnjayanti Gram Swarozgar Yojana (SGSY), Prime Minister’s Employment Generation Programme (PMEGP), J&K Self Employment Scheme (JKSES), Swarna Jayanti Shahari Rojgar Yojana (SJSRY) and other initiatives for STs, SCs and OBCs.
For the last fiscal, they had a cumulative target of covering 30098 individuals through these schemes with a credit of Rs 364.27 cr. At the end of the year, they could cover only 12222 individuals by extending only Rs 190.49 cr.
Banks have been raising a set of issues for their dismal performance. These include delayed disbursement of subsidy part, delayed forwarding of cases, failure in creating a recovery mechanism and small ticket size of the loans which impacts the initiatives. J&K bank is solely implementing the J&K government’s flagship Sher-e-Kashmir Employment and Welfare Policy for Youth (SKEWPY).
Handicrafts: Banks have extended only Rs 4.79 cr to the handicrafts sector against the target of Rs 17.82 cr they had set. This, however, is aimed at helping the artisans under various schemes that the government implements. Under the similar set of initiatives, banks have disbursed a credit of Rs 1.39 cr against a target of Rs 9.82 cr in the handlooms sector.
Women: Apparently for the lack of initiatives at the client level, the credit to the half of state’s population – the women – has gone down. At the end of March 2009, the total credit availed by women in the state was Rs 560.25 cr (3.74% of the total loan book of the sector in J&K). It reached to Rs 927.82 cr by the end of March 2010 that makes it 5.42 percent of the total outstanding credit. In March 2011, it was at Rs 898.22 cr – 5.53 percent of the total outstanding of the banking sector in the state.
Weaker Sections: Overall credit outstanding to the weaker sections across the state was at Rs 1860.42 cr (12.47% of total credit in state) in March 2009, Rs 2503.65 cr (14.63%) in March 2010 and Rs 2446.82 cr (15.06%) at the end of March 2011. The industry benchmark is 10 percent of the total credit must go to the weaker sections of the society.
Bad Assets: Loans that have gone bad in J&K have reached a level of Rs 793.39 cr. J&K Bank that is major credit supplier to the state has the highest amount of Rs 290.33 cr that has been classified as NPA. While nationalized banks have an NPA of Rs 308.82 cr, the cooperative banks have Rs 144.05 cr and the regional rural banks have Rs 46.29 cr. By the end of March 2010 the NPA were at Rs 733.40 cr.
