SRINAGAR: The Federation of Chambers of Industries Kashmir (FCIK) has raised concerns regarding the long-term financial health and operational stability of Jammu Kashmir Bank, citing its heavy reliance on non-core income sources. In a recent meeting at the FCIK headquarters, the Advisory Committee and senior members of the federation analysed the bank’s latest quarterly and half-yearly financial statements, which were made public just yesterday. The findings have raised questions about the bank’s long-term sustainability in an increasingly dynamic economic environment.
The meeting, attended by senior officials of the industrial chamber, expressed regret over the predominantly positive language in the report, which members felt obscured critical challenges. The FCIK members argued that a more balanced approach, acknowledging both strengths and weaknesses, would have presented a clearer, more realistic view of the bank’s current position.
The members, according to the statement issued to the press on Saturday, noted that J&K Bank’s dependence on non-core income sources, such as trading and investment gains, has made it vulnerable to potential financial instability. They highlighted that a significant portion of this income is tied to the bank’s activities related to settling Non-Performing Assets (NPAs). While these recoveries temporarily bolster the bank’s financial position, members warned that such a strategy lacks the consistency needed for long-term sustainability.
“Relying too heavily on non-core income reveals underlying weaknesses in J&K Bank’s core operations, particularly in areas like lending and interest income,” commented FCIK members. This trend, they noted, raises questions about the bank’s ability to generate steady income from its primary operations.
Another key issue raised by the FCIK was the reduction in the Provisioning Coverage Ratio (PCR), a move that, according to members, artificially inflates the bank’s profits. Members urged the bank’s management to consider the longer-term implications of this approach, as it could place the institution at heightened risk.
Adding to these concerns was the observed decrease in the bank’s Capital Adequacy Ratio (CAR), which now stands at 14.88 per cent. The FCIK cautioned that this figure has been manipulated by excluding profits from the past six months, an exclusion that paints a concerning picture of the bank’s capital buffer. The members warned that without robust capital adequacy, the bank’s ability to absorb financial shocks may be compromised in the future.
FCIK members argued that while J&K Bank has recorded improvements in Gross and Net NPA ratios, there remains a lack of transparency regarding the strategies that contributed to these results. The Chamber called for an in-depth analysis of recoveries, distinguishing those backed by collateral from those based solely on risk ratings. Such transparency, members suggested, is crucial for investors and stakeholders to assess the bank’s true risk profile and overall credit management approach.
Moreover, members stressed the need for improved lending practices and enhanced credit risk management to prevent future NPAs rather than solely relying on recoveries. By focusing on more effective credit risk management, the bank could better shield itself from future financial vulnerabilities.
In its review, the FCIK expressed disappointment over the lack of broader economic context in J&K Bank’s report. Members noted that while the financial statements provided insights into the bank’s performance, they failed to situate this performance within the economic challenges and industry trends affecting the region.
The Chamber also raised concerns regarding J&K Bank’s practice of parking funds with agencies such as NABARD at rates below the cost of funds. Members argued that this approach does little to support the bank’s mission of advancing loans, urging the bank to reconsider its investment strategy in favour of activities that better support economic growth within the region.
In addition to critiquing the bank’s operational strategies, the FCIK highlighted J&K Bank’s broader role in supporting local industries. They called upon the bank to prioritise the financial needs of local enterprises, particularly during challenging economic times. The Chamber underscored that J&K Bank’s role goes beyond profit-making, emphasising the importance of providing adequate funding and assistance to struggling businesses.
“Instead of adopting a harsh approach towards enterprises facing external hardships, J&K Bank should be offering flexible financial solutions,” said FCIK members. They suggested that by investing in the growth of local communities and building long-term client relationships, the bank could foster a more sustainable path to profitability.
The FCIK’s concluding remarks centred on the need for J&K Bank to adopt a more community-oriented approach to ensure sustainable growth. By addressing its operational weaknesses and refining its financial strategies, the bank could not only secure its financial future but also play a pivotal role in bolstering the region’s economic landscape.
FCIK members stated, “J&K Bank should invest in its communities and thoughtfully address challenges to foster sustainable growth and build long-term client relationships, ultimately enhancing the bank’s true profitability.”
In light of these observations, the FCIK urged J&K Bank to re-evaluate its priorities and adopt strategies that would ensure its longevity and resilience in an evolving market. The Federation, the statement said remains hopeful that the bank’s management will heed these recommendations to reinforce its role as a cornerstone of the region’s financial and industrial landscape.
