Behavior of our borrowers exceptionally prudent: CMD J&K Bank

Kashmir Magazine

KNS: First let me congratulate you for being appointed as the first Chairman of J&K Bank after the government decided to split the post of Chairman & CEO. With the financial results for the fourth quarter out, how do you see the bank placed now and positioned for the future?

JKB CMD: Thanks. Yes, I see it both as a great honour and huge responsibility. Honour to be in the highest chair of this great institution of the region and a huge duty, for, it means to shoulder the responsibility that goes beyond the confines of the institution.

Coming to the financial results, the numbers for Q4 are well within our expectations despite the constraints, we experienced in J&K since August 2019.

Amid all the uncertainty around, we kept a sustained focus on strengthening our balance-sheet. Taking cognizance of the anticipated pressure on asset quality due to COVID-19 and its lasting impact, we increased our NPA Coverage ratio by more than 14%, i.e. from 64.30% to 78.59%, while bringing down our net NPAs considerably from 4.89 % to 3.48 % on YoY basis.

Our NIM for Q4 was 4.10%, which is among the best in the industry and the cost of deposits has been brought to 4.73% from 4.98% by improving the CASA base to 53.66%. Saving bank deposits recorded a handsome YoY growth of 18%.

Moreover, the loan-book of J&K and Ladakh UTs have witnessed 13% YoY growth, thereby re-orienting the lending composition of the bank with J&K and Ladakh getting 63% share of the total lending.

Succinctly, my optimism stems from the fact that fundamentals of our balance sheet remain quite healthy for the last financial year, while as financial indicators like operating profit, NIM, yield on advances, cost of deposits, etc. are quite promising and sufficient to keep us on our growth trajectory. So, in the light of the above facts and after regaining the growth momentum in our Q4 numbers, I see the institution better placed for an upward leap post-pandemic.

KNS: But the loss of Rs 1140 Cr reported for the FY2019-20 does not paint a rosy picture of J&K Bank. How are you dealing with this amid rising NPAs from 9% to 11%?

JKB CMD: We are not in the business of painting rosy pictures either. As a financial institution, we have to always use prudence and juggle between short and long-term objectives.

We preferred to strengthen our Balance sheet for the long-term health of the Bank and substantially increased the NPA Coverage Ratio (PCR) from 64.30 % to 78.59% YoY. Otherwise, our operating profit for FY 2019-20 before provisioning was Rs 1525 Cr. Besides, we have considerably brought down our net NPAs from 4.89 % to 3.48 %.

When it comes to the stability, strength and survival of a bank’s balance sheet in these turbulent times, our focus is aligned around three main pillars.

First, the liquidity which I think is the last thing that the banking industry has presently to worry about. Given the healthy growth of deposits and frequent liquidity injections by the regulator since the pandemic has unfolded, the banking industry is flush with low-cost funds and as you can see from our recent financials, our bank’s liquidity position is quite comfortable.

Second, the solvency or the capital positioning which determines an institutions ability to bear unexpected shocks to the loan & the investment book. The timely and effective interventions by the Reserve Bank of India by extending the moratorium on credit facilities and introduction of Government guaranteed additional funding has ensured that the pressure of incremental bad loans is well mitigated. When it comes to our Bank, we have been carefully analyzing our credit portfolio since 2014 flood rehabilitation. And I am proud to say that the behaviour of our borrowers has been exceptionally prudent. Our time tested experience of exercising rehabilitation packages in the past, without affecting the asset quality of loans is helping us tremendously in making sure we see of 2020 COVID rehabilitation, without consuming much of our capital. Moreover, the biggest support to the Bank has been from our promoters, the J&K Government, which has always supported us through thick and thin. The recent capital infusion of Rs. 500 crore was a very timely intervention by the J&K Government, much needed by the Bank.

Third, is the stability in earnings which indicates the relevance and robustness of a bank’s business model. No matter how low a bank’s NPAs are, or how good its liquidity or capital positioning is, if a Bank is not able to generate a steady stream of income, its survival becomes very difficult. And as you can see, the healthy growth in our incomes, both interest and non-interest, depicts our unmatched ability to generate revenues. I think this is a strong enough indicator to demonstrate the potential of growth that our Bank is capable of, once the economic recovery starts showing up.

Having said this, we are currently more interested in increasing the stability and depth of our balance sheet than running after the toxic expansion of credit portfolio. Healthy growth is round the corner, it is the survival till then which has to be a priority right now.

KNS: Following the last-year happenings in and around J&K Bank, there has been a marked shift in public perception about the bank. How do you plan to regain the primacy in public perception this bank had earlier?

JKB CMD: (SMILES). To be in news for all right reasons remains the aspiration of all businesses and we have hogged the limelight for very long, and rightly so, in this region. But we have had our lows too and thanks to the unflinching support from all our stakeholders, we have braved all and always.

Well regarding your first statement, I would say that perception is the key for a business like ours and our numbers completely contradict what you have said. This Bank is unlike any other financial institution in the country. It is the peoples’ bank in letter and in spirit and we continue to be viewed as the peoples’ institution across the region.

During the past one year, J&K Bank has been on a transformational path, wherein a number of measures have been initiated and implemented to improve the overall governance framework and instil transparency and accountability in its day to day functioning. Implementation of RTI and adoption of CVC guidelines have hugely improved the confidence of all stakeholders in the Bank. To strengthen the governance framework of the Bank, a professional BOD comprising of 10 eminent and experienced members including two senior functionaries of the Government, Chartered Accountants, seasoned businessmen, ex-bankers, and a woman director has been constituted.

Moreover, to ensure proper decisions making in line with the regulatory compliances across all levels, all existing policies have been reviewed/revised and certainly, new ones have also been devised and adopted in the bank. Ample thrust is also being laid on improving the compliance culture in the Bank, so as to achieve better supervisory ratings. Further, with a view to strengthening the internal grievance redressal system in the Bank and as part of the migration to a more customer-centric approach, an internal ombudsman has been appointed in the Bank in compliance with the RBI guidelines.

To manage critical functions in a professional manner through people having domain-specific expertise, Bank has also initiated direct recruitments of qualified professionals for the posts of CFO, CRO, CTO, etc. This onboarding of specialists shall vastly improve the functioning of most of the core verticals of the Bank. The process of making fresh recruitments of Probationary Officers & Banking Associates in the Bank has also been reinitiated, by adopting a fair and non-discriminatory procedure and standard eligibility criteria, which is in sync with that of the UT Government. The vacancies have been notified at a higher number of 1850, as compared to 1450 notified earlier and shall ease the severe staff constraints of the Bank, besides providing a respectable job opportunity to the educated and qualified domiciles of our UT.

Yes, the thing you are referring to is true about peoples’ expectations rather perception. Let me assure you that as soon as the budget for CSR activities is available to the Bank, we shall ensure the meaningful intervention is made in all deserving areas, for the overall socio-economic development of our region.

KNS: Covid-19 has wreaked havoc across the globe and put the economies to a grinding halt. How do you manage the business continuity amid such an unprecedented situation that only followed the challenging regional circumstances post-August, 2019?

JKB CMD: As you rightly said, coronavirus caused disruption of economies across the world in a way that has no precedence in recent global history. The instant country-wide lockdown triggered by the pandemic brought the life itself to a standstill not to talk of business.

And as bank we had to face the double whammy of situational challenges post-August 2019 and the outbreak of COVID-19 in March 2020.

However, being a responsible financial institution, we leveraged upon our institutional experience of working in tough situations and managed to keep our banking and financial services available to the people of the region while remaining open to the concerns of businesses in J&K.

Likewise soon after the outbreak of COVID-19 pandemic, we immediately invoked our Business Continuity Plan (BCP) and constituted Quick Response Teams at the CHQ level to ensure that the lockdown effects are mitigated to a bare minimum on the availability of banking services and facilities to the people

While maintaining social distancing norms and following all the necessary health advisories concerning the staff and customers, we leveraged the digital domains to hilt and encouraged our customers to avail our online banking services and facilities.

Striking the balance between conducting daily operations and maintaining maximum possible social distancing norms in offices of the bank, the duty roasters were put in a place for staff to operate on a rotational basis.

Having said that we have not only taken care of peoples’ health but continue to manage their wealth as well. While providing all the banking services and facilities to the people even during the toughest of times, we have also tailored certain new financial products to help the businesses overcome the liquidity crunch, as they begin to restart their ventures with easing up of lockdowns.

Let me share some data with you. Under the Central Government backed GECL scheme, which aims at restarting the businesses that screeched to a grinding halt due to the pandemic - the Bank has so far sanctioned over Rs 1430 Cr, which is quite an encouraging performance.

KNS: What will be the focus areas of the present J&K Bank Management to drive Growth?

JKB CMD: J&K Bank operates on the principle of 'socially empowering banking' and seeks to deliver innovative financial solutions for individuals, households, small and medium enterprises, etc. In the post-NPA-snowballing scenario, our focus has remained on striking a balance between safety of funds lent and margins earned in return.

In order to drive growth, our strategic focus and thrust will remain on retail and agriculture sectors and achievement of annual targets, while reducing CAPEX and revenue expenditure to improve the overall profitability. Moreover, the focus shall also continue to remain on various government-backed infra-structural projects and sponsored schemes/ entrepreneurship development programs that are essential for the growth & development of our region, besides employing the capable youth. Financial empowerment of farmers/agriculturists has been prioritized and taken up on a mission mode. 100% saturation of farmers under KCC Scheme shall be ensured within the set timelines.

Moreover, we have entered into MOUs with various important institutions throughout our operational geography to build long term relations besides improving the sales culture. Faster delivery of services and reduction in Turn around Time (TAT) is being ensured to provide superior banking experience to customers, through our increasing digital footprints and automation of various operations.

We are reducing the cost of operations by on-boarding of customers to digital channels and enhancing the sale of third party products. In a way, you can say, a lot is happening on and off ground and we believe that we shall be reaping better harvests in the post-COVID times.

KNS: J&K Bank is the top lender Bank of the UT and is part of every growth story of J&K since its inception. As you know business establishments in Kashmir have been hit since August 2019 and pandemic has worsened the situation. Can they expect some big relief package from J&K Bank soon?

JKB CMD: Yes, who knows it better than us as an institution of systemic significance to the region’s economy?

These last few quarters have been difficult for the region’s economy, both in terms of scale and impact. It’s only through an interplay of people’s emotional equity, determination of our staff and the support from our promoter i.e. J&K UT Government, we have been able to manage the twin crisis caused by challenging August aftermath and the outbreak of unprecedented COVID-19 pandemic.

Coming to your big relief package point, let me put on record that, one, the bank has already implemented the RBI-approved November-2019 relief and rehabilitation package, thereby re-structuring the eligible accounts affected by the post-August 2019 situation.

Second, the bank has also fully implemented the Central Government’s directions regarding a moratorium on repayment of loans since the outbreak of ongoing Pandemic. Moreover, the Bank is proactively supporting the businesses across the country, by providing them the much-needed liquidity support under Central Government’s Guaranteed Emergency Credit Line (GECL). So far our Bank has sanctioned more than Rs 1430 Cr of GECL Loans, out of which around Rs. 1360 Cr stand already disbursed.

Besides, we have also tailored certain new financial products to mitigate the liquidity crunch of businesses not eligible under GECL Scheme, so as to ensure handholding of businesses & borrowers across the spectrum. The schemes were devised after taking feedback and suggestions from all stakeholders involved. While saying that, I would like to reiterate our support to all the businesses of the region to the best of our capabilities and within the regulatory framework.

KNS: At a time, when the digital revolution is sweeping the banking industry, J&K Bank is still expanding its presence through brick and mortar branches. How do you explain this to the new-age digital consumer?

JKB CMD: Being at the forefront of the digital revolution in the banking services here in J&K and Ladakh, we are well aware of the operational geography of this region. Our clientele is as diverse as the spectrum of our product profile.

Home to some of the toughest terrains in the country, we are in the process of implementing 100% financial inclusion in J&K and Ladakh, besides increasing our digital footprint to every nook and corner of the region.

So the very composition of our clientele guides our policies of expansion in digital and conventional domains, as we consolidate our position in and across this region.

KNS: J&K Bank is known for hiring professionals in every sector of the Bank. Can there be separate recruitment for Journalism & Mass Communication with Public Relations experience who can run the Public Relations Department of the Bank?

JKB CMD: The recruitment processes of the Bank is done while following the already laid down guidelines by the board of the bank from time to time.

Having said that, the Bank always works on the principle of the right person for the right job; wherein all the qualifying factors are taken into account. Pertinently, the department that you refer to is being run by qualified personnel from the field of Mass Communication and Journalism, besides those having strong academic background in Marketing and Business Execution.

KNS: Is there any defined tenure in J&K Bank transfer policy for employees as it is two years in government service?

JKB CMD: The Bank works on the principle of optimum utilization of human resource while ensuring compliance to the necessary risk and regulatory frameworks. The Bank has a well-defined transfer policy for employees that operates with fairness and objectivity. A tenure of 3 years at a particular posting has been prescribed as per Transfer Policy. There is also a proper grievance redressal mechanism in place to address any genuine and emergency concerns involved. I have been personally monitoring compliance to the transfer policy in general and implementation of transfer orders in particular. Moreover our presence is pan India with staff only from the UT of J&K and Ladakh and we have to transfer staff to other centers from these UT’s only that means an employee has to move out of UT of J&K and Ladakh to other centers while employees who have completed their tenor outside the UT’s have to come back home.

Having said that, we must understand that every policy, in essence, is meant to administer the processes and people well within the organization. So, at times, exceptions may be necessitated by the same interests of better administration, wherein the management exercises powers within its domain.

KNS: Some media reports suggested that J&K Bank recently stopped salary of 2800 employees on the directions of the court. How do you see their future in the bank?

JKB CMD: Yes, as a responsible institution, we have to abide by the directions of the hon’ble court. Since the matter is sub-judice, I would prefer not to comment on the issue.

Now that we have had a long conversation thus far, I can perceive the glow on your face which itself is a strong indicator of J&K Bank’s bright future supported by unmatched emotional equity invested by the people of the region, unparalleled commitment of all its family members and the consistent support from the UT Government.

KNS: Thank you for sparing your time for this generous and candid interaction.

JKB CMD: My pleasure.