The Half Year Story


During the first six months of the current financial year, the banks operating in the state have increased their advances. But they have under-performed if their achievements are compared to last year. This, they did, while reducing their bad assets, reports R S Gull

One of the State Level Bankers meet  being chaired CM Omar Abdullah in Srinagar.

One of the State Level Bankers meet being chaired CM Omar Abdullah in Srinagar.

As many as 42 banks and financial institutions operating through a network of 1737 outlets across J&K have advanced Rs 5607 crore in the first half of the current fiscal. Though they have pushed the overall exposure to Rs 26802 crore, they have actually under-performed. Against the target they had set for the sector, the overall performance is only 34% which is eight percent below the achievements they recorded in the first half of 2012-13.

For the current fiscal, banking sector has set a cumulative target of Rs 16322 crore for both priority and non priority sectors. By the end September, the first six months of the year, they have advanced Rs 5607 crore only. Interestingly, non priority sector has consumed less credit compared to the priority sector. Against Rs 2357 crore that has gone to the commercial sector, the banks have ended up advancing Rs 3251 crore to the priority sector – which is continuously being monitored by the state government.

Cumulatively, banks have access to a chest of Rs 66223.28 crore deposits against which the overall advances in the state are Rs 27324 crore including Rs 655 crore investment in state securities. It makes an overall credit deposit ratio of 40.47 percent which is far below the RBI benchmark of sixty percent. This is despite the fact that deposits in J&K have not phenomenally soared since March 31, 2013 unlike advances. By the end of last fiscal, banks had Rs 64480 crore with them against overall credit of Rs 23542 crore. Precisely, banks advanced Rs 3259.94 crore in last six months even though their deposits increased by Rs 1743.58 crore only. But that has nothing to do with industry benchmarks.

 The scene continues to be dominated by the state owned J&K Bank.  It owns 37% of bank branch network in the state but controls 61.31% (Rs 40606.50 crore) of the overall deposits and has the lions’ share of 67.65% (Rs 18485.59 crore) in the overall bank credit.

Commercial Credit

For banks, entire credit is commercial. Even under categories in which they are supposed to offer low cost credit, the subsidies are borne by the governments’ directly or indirectly. But the credit that is strictly decided on merit, and yes sweet discretion (especially in J&K) of the banks, forms the non priority sector. It even goes to the areas which are not monitored or listed in thrust areas.

For 2013-14, the banks in J&K have set a target of offering a non priority credit of Rs 6180.22 crore with more than half of it supposed to be managed by the J&K Bank. By the end of first half of the current fiscal, the overall credit dispensation under this category was Rs 2356.77 crore making barley 38% of the target achievement.

Compared to their performance in the first half of 2012-13, they missed their target by 10%. While J&K Bank managed to achieve the target of 48% followed by 41% achievement by the Regional Rural banks (RRBs – all put together), all others could barely manage 14 to 24%. But the leader has under-preformed phenomenally: it compromised its record on yoy basis by only 24%!

Where the non-priority credit went is also an interesting story. Against the target of advancing Rs 829.80 crore credit to heavy industry, only Rs 256.73 crore was actually dispensed and it was done solely by the J&K Bank

Against the target of Rs 566.28 crore for medium industry, the actual achievement was only Rs 49.25 crore of which 95% was provided by the J&K Bank.

For the education sector, otherwise a key area that is witnessing massive growth, banks have set a target of Rs 310.64 crore. In the first half of the year, they ended up dispensing Rs 5.44 crore which is achievement of two percent of the target!

For housing sector, banking sector achieved a target of only five percent by dispensing Rs 47.16 crore against the yearly target of Rs 858.93 crore.

Of the balance Rs 3614.78 crore yearly target for rest of the activities, not specified, the actual disbursement was 55% as Rs 1998.19 crore was dispensed. J&K Bank has 72% share in it.

Interestingly, in the non-priority credit, Kashmir offers a better scene than Jammu and Ladakh. By absorbing Rs 1210.35 crore credit, banking sector had 43% target achievement as compared to 34% target achievement in Jammu that witnessed credit off take of Rs 1094.78 crore. Ladakh had modest absorption of Rs 48.64 crore which is 24% of the Rs 199.82 crore yearly target.

J&K Bank Corporate headquarters in  Srinagar. Pic: Bilal Bahadur

J&K Bank Corporate headquarters in Srinagar.
Pic: Bilal Bahadur

Priority Credit

Regulator RBI has set clear benchmarks about the priority credit. Various activities falling under agriculture, industry, housing, education and retail forms the core of the priority sector lending. Banks are supposed to offer 40% of the overall advances to the priority sector. While 18% of the overall advances must go to the agriculture sector, 10% must essentially go to the weaker sections, and five percent to women. In case the banks fail in meeting these bench marks, they are penalized by volunteering a specific corpus at nominal costs to NABARD. It has bled banks in the past, so not many are taking chances on that front.

Banking industry in the state has 56.50% of its overall outstanding credit falling under priority sector. While the percentage of agriculture credit to overall outstanding has increased to 16.21% by September 2013, it is still 1.79% short of the industry benchmark. Advance to women is at 4.37%, which is 63 basis points less than the benchmark.

Interestingly, however, advances to weaker sections has nosedived from 19.72% to 14.85% in a year ending September 2013. Similarly, lending to MSMEs is compromised by 0.79% to 30.50% in a year.

Strictly following the non-priority sector trends, banks under-achieved their targets in priority sector: advanced Rs 3250.72 crore against a yearly target of Rs 10142.46 crore making a target achievement of only 32%, less than one-third. Compared to their performance in the first half of the last fiscal 2012-13, they missed their target by 7% which is huge. The highest achiever has been the J&K Bank that hit 39% of its target but, compared to September 2012, it missed its last record by 11%.

Detailed analysis of the priority credit off take suggests agriculture sector got Rs 1095 crore, MSE Rs 1130 crore, Education Rs 53.46 crore, housing Rs 655.21 crore as Rs 317.66 crore was consumed by retail and other sectors. But in no sub-sector, the banks could achieve even half the target in the half year of operations. Agriculture witnessed only 34% target achievement, micro and small enterprises saw 32% achievement of the target, it was a modest 13% in education sector and 32% in housing. Unspecified priority areas had 35% target achievement.

On regional basis, the disparity in credit dispensation followed the non priority sector pattern: Kashmir absorbing more than Jammu and Ladakh put together. Banks could deploy Rs 2077.48 crore in Kashmir to achieve 38% target as Jammu could absorb Rs 1105.50 crore and Ladakh Rs 67.74 crore making a target achievement of 25% and 37%, respectively.

Sponsored Schemes

Also forming part of the priority sector, there is a basket of five state sponsored schemes which banks are implementing. For the current fiscal, the banks have set a target of advancing Rs 472.81 crore involving 30090 beneficiaries. The achievement by the end of half year is Rs 82.63 crore involving 4503 beneficiaries. It means achieving the financial target of 17% and physical target of 15%.

Under these schemes, Kashmir was supposed to get Rs 348 crore, Jammu Rs 104.83 crore and Ladakh Rs 19.98 crore in the year ending March 2014. So far Kashmir got Rs 52.73crore, Jammu Rs 24.28 crore and Ladakh Rs 5.62 crore which makes achieving financial targets of 18%, 23% and 28%, respectively.

Neither of the five schemes is doing better. National Rural Livelihood Mission, NRLM (formerly SGSY) has 14% target achievement in six months, PMEGP has 15%, SJSRY has 36%, JKSES has 20% and SC/ST/OBC has 22%.

In the first half of the year, the banks have advanced Rs 5.85 crore to handlooms and Rs 18.50 crore to the handicrafts sector – also forming part of the priority sector. They also advanced Rs 65.75 crore to artisans through artisan credit cards.

It essentially makes J&K Bank the major stakeholder in the NPAs as well. Of Rs 1207.82 crore cumulative NPA by the end of September 2013, J&K Bank has Rs 426.48 crore.

Bad Assets

By the end of September 2013, banking sector across J&K have cumulative non-performing assets worth Rs 1207.82 crore. The NPAs were at Rs 1216.75 crore at the end of March 2013. It essentially means, they have reduced it slightly in last six months. In last six months, J&K Bank has reduced its NPAs from Rs 444.59 crore to Rs 426.48 crore, state controlled cooperative banks have improved their bad assets from Rs 168.46 crore to Rs 157.83 crore while as the Grameen Bank has added its NPA load from Rs 58.50 crore in March 2013 to Rs 63.82 crore in September 2013. Even the public sector banks have reduced their bad assets: Rs 545.2 crore in March and Rs 532.54 crore in September 2013.

(Note: The concluding part of this half yearly banking story appears next week.)

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