Costly handling

The government needs to be sensitive in its handling of the only listed company of the state, and not treat it in the same line as the mismanaged corporations. Even small decision can have sharp reactions in the stock market. A Kashmir Life report.

(L to R) Sudhanshu Pandey and Ajit Singh

Since it was set up by Dogra monarch in 1938, a number of individuals at various levels have contributed their bit in making J&K Bank a behemoth of state’s money management. This obviously, besides the people who see it as custodian of their earnings and the dedicated lot of around 8000 people who run it in length and breadth of India especially J&K where its footprints are almost impossible to be replicated by any other entity.

Sometimes even small decisions have made big impacts. Mohammad Shafi Pandit, Kashmir’s first Muslim IAS officer as secretary finance, for instance, took a decision that the salary of state’s all the employees will be routed through J&K Bank. It not only helped employees to make savings but also offered the bank access to a huge corpus of low cost deposits.

It was its chairman S D Singh who decided to the take the bank public. But the dream was realised by his successor M Y Khan, who made it Kashmir’s first listed company. At the peak of militancy Khan successfully launched such a campaign that the issue was oversubscribed. Khan’s over eight year long leadership of the bank was crucial because it was in his era that he gave it a corporate identity. “In Ahmadabad when I wanted to address a press conference, they asked if it was a cooperative bank,” remembers Khan. Even its cheques would not be accepted by other banks outside Kashmir.

Khan was succeeded by Dr Haseeb Drabu, Kashmir’s top notch economist in 2005. He gave it a direction and offered a blueprint for consolidating the empire. Apart from being a development bank, it functioned as commercial banks as well. With a semblance of peace returning back to Kashmir, Drabu invested more back home to a highly credit starved economy breaking the myths the Valley lacks capacity to absorb credit. The credit off take in Kashmir from J&K Bank jumped from Rs 5139.89 crores at the end of March 2005 to Rs 12344.30 crores in March 2010.

Dr Haseeb A Drabu

Like Khan, Drabu was not supposed to preside over the bank perpetually. Though his term was supposed to complete in September 2011, the government holding 53 percent of the shares of the bank, decided to oust him earlier. Leaders of all the state run organisations do stay on the sweet good will of the government. It was almost the same in this case as well.

But the only tragic part of this change was the unceremonious ouster. In fact, the decision makers in the ruling dispensation had planned it to be more disgraceful had not Drabu’s predecessor M Y Khan intervened. Khan who completed his tenure at a time when a rival regime was in power and paved way for his successor smoothly after his graceful exit did not want to create a bad precedence for future.

Given the inherent political instabilities that have remained indelible over J&K’s post-partition history, the state existed on the margins of the small and big revolutions that took place in Indian plains on the financial front. J&K is still far away from getting the one percent of the total banking credit of India’s banking sector despite making over one percent of India’s population!

For J&K it has been only the J&K Bank that could be built over the decades, literally brick by brick. When people see the fate of state government’s commercial activities – from J&K Industries – that is now selling its land holding to pay for its employees salaries, to the SRTC – that has open position for MD and nobody wishes to be one, they see J&K Bank as the only institution that J&K has created. The bank being the only listed company entails it being a hyper-sensitive institution. It essentially requires a treatment that is different from how the state fiddles with corporations. As one third of the shareholding is with foreign institutional investors, the policy makers need to act with caution because it can trigger chain reactions.

M Y Khan

Successful handling of J&K bank will help the state taking J&K Power Development Corporation (PDC) public, a dream that policy makers in the state have been raring for many years now. But before limping to achieve that status J&K needs to understand the niceties involved with the stock market. Interestingly, the employees of J&K Bank have understood the intricacies of being in this trade. It is the only organization in the state that opens in time and where people are seen working till the day’s job is over. They are mature enough that they have never resorted to strikes for around eight years now which is a huge indicator of evolution of an organization.

Investors are traditionally sensitive to any unpredictable developments in listed entities. On Monday when the acting chairman Sudhanshu Panday, who is also state’s finance secretary, is meeting investors in Mumbai, even a petty report can trigger a problem.

At the same time, however, authorities in the civil secretariat and those running the institution should be very sensitive towards what the people think and need. Banks are not only custodians of the deposits that people make. Off late, they have emerged as shops and financial supermarkets where products related to finance and money are sold and purchased. Dispensing cash has now been relegated to the ATMs as the branches of all the banks have become operation rooms to strategise products and identify potential customers. Now banks also sell third party products that they do not belong to them but they get cuts for selling them. They sell insurance and mutual funds.

If banks are shops they must find time to open and earn whenever time permits them in bad situations. They are like grocers and vendors selling other items of consumption. Even if the majority share holding is vested with the state government, this does not reduce the bank to the status of a routine department. Using commercial institutions as political tools has the potential of boomeranging at the cost of the institution itself. One of Kashmir’s most bitter historic realities are that institutions were politicized leading to erosion and loss of credibility of the institutions.

Mushtaq Ahmad

Currently an interim arrangement is in place. Panday was initially appointed as acting chairman by the Board of Director after Drabu put in his papers. The RBI, however, approved a different plan of setting two different committees and offering management of day to day affairs to Ajit Singh, the senior most executive in the management team. Both the committees operate under Panday. An interim management is custodian of the system that it inherits till the duly appointed persons take over.

The board has also sent a three-member panel to the RBI. Apart from IAS officers Ms Tanveer Jehan and G A Peer, the only banker in the panel is Mushtaq Ahmad. A former executive director of J&K Bank, Mushtaq has around 35 years of banking experience and is likely to be appointed.

Mushtaq has risen from the ranks after being appointed as probationary officer (PO) in early 70’s. He headed bank’s credit, forex and investment for a long time. For around a year he was executive director of the bank that enabled him to be on board as well. Post-retirement he kept himself busy with the personal investment business. Originally from Uri, he lives in Hyderpora.

Khan who recently interacted with the media to “correct certain distortions” said Mushtaq will be the Chairman and the Managing Director of the J&K Bank and RBI will not bifurcate the position. “Neither was I a banker nor Haseeb was one,” said Khan, “but we are having a banker as chairman now.” He will be the first ever leader of the bank who belongs to the bank.


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