SRINAGAR: Insisting that there is a huge market left untapped for lack of a Shariah compliant product in J&K, state’s finance minister Dr Haseeb Drabu on Thursday suggested re-designing of just-launched Family Protection Saving Back Account (FPSBA) into a no-interest financial product. This will fetch the product a huge acceptability from a section of people within and outside J&K, who are staying away from such products because of internet linkages.
FPSBA is a bundled co-product between J&K Bank and PNB MetLife that has an inbuilt insurance cover. The insurer will deduct a yearly premium from the saving account and will repay the mean average income in case the account holder dies. The premium will be decided on basis of the risks involved especially the age. J&K bank will sell the product for its insurance partner at a commission. Interestingly, this insurance product has the benefit of skipping a visit to the doctor for a health check-up.
After launching the product, Dr Drabu, who earlier headed the bank, said that the product requires a bit of re-designing to make it a product that can attract people who do not see interest as an income. He suggested that if an account holder maintains a particular balance in his account throughout the year and the interest it earns is equal to the premium for the insurance cover, why should not the product fund the cover directly. People not thinking in terms of interest, he said, will be attracted towards the product as it does not add costs to them.
Dwelling on the overall scenario of the financial sector in J&K, Dr Drabu said while the per capita income in J&K is not hugely different from the rest of India, Kashmir is suffering for an abysmal low rate of savings. People are invested in gold and land as they lack choices for investment and this is where J&K Bank must play a role, he said. Public investment goes down impacts job creation,
“If J&K Bank is able to convert only 10 percent of the assets locked in gold or land, it can double its deposit base at any given point of time,” Dr Drabu said. “But there has to be a product or a series of products which are attractive.”
He said that while various interventions at the government level and at the level of banks have led to a fairly good impact on the financial inclusion front, the real worry is the lack of financial deepening. People are normally using insurance products to manage their tax liabilities but a re-design is required so that these products, or some of them, become attractive investment proposals. This situation was normally reinforced by the banker because he would see insurance as a liability to his deposits thus reducing insurance’s normal growth rate. “This needs a change,” he said.
Drabu said that lot of changes are taking place at the public finance level, both in state and the centre. He said after he highlighted the idea of a Universal basic Income (UBI) in his budget, there is lot of discussions taking place about this. “The issue is that when one day UBI becomes a reality, are the banks in a position to gather adequate deposits accruing out of this intervention and converting them into long term assets for the beneficiaries,” Drabu said. “The real challenge for banks is to see how best rate of savings appreciate.”
Insisting that J&K Bank continues to be at the centre of financial management of J&K, Dr Drabu said that it has a huge role to play in an era in which technology has started improving delivery. With most of the bank executives including the Chairman and CEO Parvez Ahmad as part of the function, Drabu took the opportunity of highlighting the priorities for the bank.
“As the Chairman said the bank symbolizes a history of people’s trust of 70 years, the heritage institution must value the emotional equity of the people,” Drabu said. He said the bank must immediately go for improving operations and using technology as a tool. “You have to have better asset quality and improve your growth rate.” Besides, Drabu suggested mopping up of liabilities as fast as possible. He suggested the bank must spend next eight months in appreciating growth and improving its asset quality.
Later talking to reporters, the minister said that developmental activities across Kashmir will see a huge jump with the start of new fiscal as the departments, especially the R&B, are resource-full to jump start. He hoped the situation would remain better and conducive to development. He said the government has already allocated and partly released resources to all the developmental agencies for bridging the developmental deficit.
The product launch function was also attended by the top management of the PNB MetLife.
“The economy of J&K need two things. One is financial inclusion, which J&K Bank is doing very well. But parallel to this must run the process of financial deepening of services now,” a spokesman of the JK Bank quoted minister Drabu saying. “For most of the stock of our savings is physical mostly either in the form of land or in gold. If we can convert 10 percent of this stock into savings that will be a huge thing for state economy whereby J&K Bank can gather these deposits and put them to some productive use.”
Correcting the perception about low CD Ratio of banks in J&K, Drabu said that it was more about the avenues to lend in the state than the reluctance to lend by the banks.
Urging the management of bank to think and devise innovative ways to leverage the bank’s tremendous emotional equity and immense presence across the state to its maximum, Drabu said: “I feel very comforted by the Chairman J&K Bank’s keen sense of responsibility towards the emotional equity and trust people of state repose in the bank.”
“It is the moral, ethical and professional duty of every member of the J&K Bank to respect it and create further value for all the stakeholders. And I believe that under the leadership of Parvez Ahmed you shall be successful in doing that”, Drabu added.
Earlier, Chairman and CEO, Parvez Ahmed in his launch speech to the audience called the occasion eventful for the partnership between J&K Bank and Metlife had recently completed its 15 successful years of togetherness. During that period the voluminous script of transition and transformation can be condensed to a liner as Period of Acclaimed glory of Universal Banking Brand with an enhanced Image that earned international reputation and association of Foreign Institutional Investors who still hold the second largest share in our equity after Government of Jammu and Kashmir.
Reverting to the Essence of the Product Launch, Parvez recollected the excerpts from his first meeting with the then Metlife Head in 2001 rewinding that three things that had attracted Metlife to the state were J&K Bank’s robust reputation, strong network and the untapped life-insurance market.
Emphasising to the people at both sides of the partnership, Parvez described that as Chairman of the Bank, his only focus was to derive maximum benefits from this partnership for the customers of his Bank who he said were unconditional in reposing their faith and trust on this indigenous Bank who they always believed was their own entity.While advising the Metlife top Brass to ensure maximum value addition to the investments of our customers, Parvez asked his Managers to ensure due diligence, ethical selling with consent and maximum awareness to the cutomers about the benefits of the Metlife so as to ensure our sincere custodianship of their faith and loyalty.
Ashish K Srivastava, CEO (Interim), PNB MetLife, called the launch of of the new product as the significant step towards making the relationship between J&K Bank and PnbMetlife stronger while serving the customers best.
“As many of you know, we embarked on our journey with J&K Bank in 2002 and since then we have covered lives of close to 350,000 customers of J&K Bank with life cover amounting to approximately Rs 11000 cr,” Srivastava said.