Why JK Bank Downgrade Is Being Seen As A Bad Decision?


by Masood Hussain

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SRINAGAR:  With politics frozen ahead of winter, the enigmatic decision-making by the governor’s administration on the J&K Bank has started triggering heat and dust. The reactions have started pouring in from Delhi to Srinagar and the trade is readying to get into the ring.

“BJP under Modi & Shah is eroding the autonomy of all key institutions,” Congress’s former minister Jairam Ramesh said. “It was RBI recently. Now it is J&K Bank, which is a very unique and important institution of the state.”

Governor Satya Pal Malik chairing SAC meeting at Jammu on November 22,2018.

State Administrative Council (SAC) led by governor Satya Pal Malik and his three advisors on November 22, brought JK Bank under the purview of RTI, CVC Guidelines, and the state legislature. It also approved the proposal for treating the state’s first listed company as a Public Sector Undertaking (PSU).

“The SAC approved that the provisions of the Jammu and Kashmir Right to Information Act, 2009 shall be applicable to the J&K Bank Ltd like other PSUs besides the Bank shall follow CVC guidelines,” an official spokesman said. “The J&K Bank Ltd shall be accountable to the State Legislature like other State PSUs.  The Annual Report of the J&K Bank Ltd shall be placed before the State Legislature through the State Finance Department.”

The government spokesman said since the state government currently holds 59.3% shareholding and is a major stakeholder, “a need was felt that it should have a character of a PSU which is subject to general supervision and access for enhanced transparency in the transaction of its business to promote public trust.” It added: “The purpose of the SAC decision is not to question the day to day activities of the Bank management but a step towards strengthening better corporate governance.”

Oldest Institution

One of the oldest institutions of the state, JK Bank is an ‘old generation private sector bank’ and state’s only listed company. It is the only bank in India in which the state government holds majority shareholding.

JK Bank Corporate head quarter Srinagar. KL Image

The decision is seen as an attempt on the autonomy of state’s only financial institution that has lost part of it when the state government shifted to RBI for its routine debt banking earlier. The Bank is being overseen by the Comptroller and Auditor General (CAG), the state legislative assembly is discussing it, if and when it requires. Even the Jammu and Kashmir Police have been taking cognisance of cases if and when it reaches them.

The major issue is that if the governor and his team have a right overtaking a decision that has far-reaching consequences for the bank. The SAC is a group of people appointed to the office and not elected to the office. The market is expected to fiercely react to the decision as it indicates the government wants to exercise control over it.

The decision almost downgrades the bank to the level of other PSUs where the top executives are appointed by the government to the level of Managing Directors.

The Bank is regulated by the RBI under Banking Regulation Act that lacks any room for making it subservient to the state legislature. The SAC decision is expected to take the minority shareholders out and away from the bank.

The decision will impact the core banking decision-making as it will be exposed to diverse instruments of the state control, experts insist


The political parties have started reacting to it vociferously. Quoting Omar Abdullah, the NC Vice President, Indian Express said he termed it as “disturbing development” as Governor lacks a “people’s mandate to take such major decisions with far-reaching implications”.

Mehbooba Mufti

Mehbooba Mufti said that the Governor administration is taking such decisions which smack off attempts to fiddle with the basic characters of the state’s special status.

In a statement, Ms Mufti said there are assaults on multiple fronts against Jammu and Kashmir’s special status and the Governor administration is taking away the autonomy of institutions that J&K enjoyed. “J&K Bank is part of this game plan and this was the reason PDP came together with NC and Congress to form a government and prevent such interventions,” Ms Mufti said. “These things have to be left to the democratically elected government in Jammu and Kashmir. The Governor is not mandated by the people of the state to take such decisions.”

“We believe in smaller government, not more government control,” Indian Express quoted Sajad Lone saying. “The best thing the government of the day can do is to get out of the way. Any remedies (regarding J&K Bank) should have been institution-specific, rather than invading it with overarching government control. The track record of J&K government PSUs is extremely bad.”

Raj Bhawan Says

Defending its decision, a government spokesman said the SAC latest decision is aimed at “promoting good governance and transparency” in the functioning of the bank.

“Extension of RTI Act and CVC guidelines is only aimed at promoting Good Governance and transparency in the functioning of the Bank, as this premier financial institution has often been questioned on both these counts by the general public,” an official spokesman said. “The concerns raised by certain isolated quarters mainly relate to the operational autonomy of the bank.”

“Since the State Government holds 60% of majority shares in J&K Bank, for all practical purposes, it is a PSU,” the spokesman added.

“It may be pointed out that J&K Bank was recently fined Rs 3 crore by RBI for not following KYC/ Anti-money laundering norms,” he said and added that bringing the Bank under the ambit of CVC guidelines will ensure better adherence to RBI norms in future.

Spill Over

Since the controversial decision-making took place at a time when the governor dissolved the assembly in a highly questionable manger, the issue of fiddling with the bank character is only expected to raise more fingers.


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