J&K Bank Makes A Comeback

Kashmir Magazine

The J&K Bank Chairman and Managing Director R K Chibber in an interview with Editor in Chief Kashmir Magazine Muhammad Aslam Bhat talks about the promising growth of the bank supported by figures in last one year.

Bank since you took over, and about business continuity during disturbances.

JKB CMD:One of the best ways to assess the performance of any financial institutionis by its numbers. And our recent Q2 numbers bear testimony to the fact that despite unprecedented difficulties during the last one year, we have come up with promising figures reflecting the trend of turn-around in our financial results, when compared to last year figures.

With improving financial indicators, posting net profit of Rs 43.93 Cr in September 2020 after a loss during the same period of the last year, is quite encouraging for us as we move ahead on the envisaged trajectory of growth for achievement of institutional excellence.

Indicative of our markedly improved asset-quality, the net NPA ratio has sharply come down from 4.48% as on September 30, 2019 to 3.03 % on 30th September, 2020, while the Gross NPA ratio has also decreased considerably from 10.64 % to 8.87% on YoY basis. The provisioning for bad loans is at 80.40%, which is one of the highest in the industry, while the bank’s Capital Adequacy Ratio was at 11.86%, well above the regulatory minimum.

For this turnaround of the Bank in the shortest possible time, I thank the entire J&K Bank family for putting in best of their efforts, our Board of Directors for their able guidance and our promoter and major shareholder i.e. the Government of J&K UT - led by Hon’ble Lt. Governor Manoj Sinha Ji – for their continuous support and all other stakeholders for reposing their trust in the premiere financial institution of the region.

Having said that, I strongly believe that posting of profits for two consecutive quarters, significantly improved asset-quality with a marked improvement inmost of the key financial indicators will definitely send positive signals to the markets and boost the our ability and prospects to mobilize the Rs 4500 Cr capital already approved by theBoard-of-Directors and the shareholders.

Talking about business continuity during disturbances, it is something which we have mastered over the last many years as a result of recurrent disturbances witnessed in the region time and again. We are where we are and it is because we have braved the situation well and are successfully moving ahead with the hope and determination of better times.

KM:HR Policies play a vital role in shaping the growth and development of an institution. What measures did the Bank take with regard to its HR policies since you assumed office of Chairman & MD?

JKB CMD:The HR policies of the bank were renewed and aligned with the best industry practices. Creation of posts and identification of vacancies in all cadres is now approved by the board-of-directors. We are maintaining the highest level of transparency in recruitments, career progression and all otherHR related matters.

Moreover, the skill-sets of the people handling different assignments are being regularly upgraded through advanced training courses conducted internally, in most cases, at our Staff Training Colleges that are being managed by a set of very professional and experienced faculty. Simultaneously, for specialized and cutting-edge training in risk, strategy, cyber security; the bank’s HRD organizes training programs for the concerned staff in the country’s most prestigious banking and finance institutions.

You can say that a lot of positive stuff is going on in the Bank with regard to various HR practices, all of which are aimed towards the overall grooming and career development of the staff and you will feel its complete impact in the very near future.

KM: What measures have been taken to improve the governance framework in the Bank?

JKB CMD: Implementing best corporate governance practices is of utmost importance to every company and is in the interests of all stakeholders involved. From the day I assumed the charge as CMD, this aspect has remained quite high on our priority list. Implementation of RTI Act and CVC guidelines in the Bank shaped up the things for us and we have since ensured that every dealing and transaction entered into by the Bank are fully transparent and on the basis of merit.

Today, we have got a very strong Board in place, and comprises professionals from different backgrounds having sufficient knowledge, varied expertise and diverse experience about the banking, finance and associated fields. Ranging from capable administrators to reputed corporate leaders and risk specialists to accounting experts, our Board represents and reflects the Bank’s intent as well as the capability to work for excellence in every sphere of its strategy and execution.

KM: Given the volatility in the Banking sector of the country, what steps were taken by J&K Bank management to sail through and ensure growth?

JKB CMD: For banks, volatility is a part of the game and that is why we have a very robust and comprehensive risk management framework in place to factor in all the risks associated with operations, businesses, markets and other areas of concern.

As the flagship financial institution of our region, we ensured that not only the Bank, but its most important stakeholders-its customers, also sail through these tough times. We remained actively involved in the survival and revival of our local economy by passing on liquidity support in the shape of Government backed GECL scheme and our own indigenous Business Support Loan Schemes besides passing on all reliefs and benefits announced by the regulators/government, including the six month moratorium, FITL scheme to fund interest liability, reimbursement of compound interest, etc. in a timely manner.

COVID-19 dealt a severe blow to the global economy and J&K Bank too was affected, however we made special provisions of around RS 380 cr to deal with any COVID related stress in our loanbook. Moreover, our NPA Coverage ratio of above 80%, which is one of the best in the industry, also makes our position quite strong to deal with any unexpected delinquencies.

KM: How do you see the current business and channel growth and what are the future prospects with regard to the same?

JKB CMD: With the resumption of all businesses, the economy is back on its wheels returning to near pre-COVID levels. The demand for credit has correspondingly started to witness an upward pull.Therefore; we foresee the complete normalization of business during the next few quarters, while we anticipate a growth trajectory of over 25 % in our business in the UT next financial year.


KM: Many say some recent steps have been taken with regard to cost management and cost austerity in J&K Bank?

JKB CMD: It is true that we have taken multiple measures for rationalization of costs and curtail/restrict avoidable expenditures. Various steps to reduce our operating costs include closing/merger of controlling and administration offices, de-hiring of unoccupied premises, conducting meetings through virtual modes besides curtailing other routine expenditures to justified levels.We have also managed to bring downour cost of deposits down considerably from 5.04% recorded in June quarter of 2019 to 4.20% in our Q2 for the current financial year.

However, the cost reductions have been implemented while ensuring there is no compromise on the quality of our operations and services rendered to our customers and common people in general.

KM: Why CSR spending has been stopped. What does it indicate about the financial health of J&K Bank? Moreover is CSR spending necessary according to corporate rules?

JKB CMD: Yes, CSRspending has been halted for the time being, due to lack of budget available, which is to be fixed strictly as the regulatory guidelines on the matter.It only indicates that the average profits for the preceding three years are not enough to consider CSR projects for the time being and can be resumed as soon as the budget is available under the head.It in any case doesn't tell anything about the current status of company’s health.

KM: Is it true J&K Bank has shifted focus from corporate lending to retail business? Doesn’t it indicate paradigm shift in lending policy due to rising Bad loans.

JKB CMD: As has been the case with most of the lending institutions, our experience with big ticket corporate loans – outside J&K UT has not been encouraging. These corporate loans form a major portion of our bad loans today. Therefore, as a strategy to build a robust lending portfolio and protect our profit margins,we have steadily started to shift focus to the retail sector because of its low delinquency levels, higher risk reward ratio, better pricing and portfolio diversification. It’s ticket size may be small but so is the risk and with better recovery prospects.

This strategy has helped us to contribute more towards strengthening the grass-root level economy by funding productive sectors of the economy, including the MSME sector which in turn has helped in employment generation and effective lending and saving cycle.

KM: As the country and world is witnessing economic distress there has been a rise in NPAs. What are the steps J&K Bank has taken to increase the value of its shares?

JKB CMD:Although no corporate has a direct control over how its stock performs in the market, yet better financial performance leads to increase in investor confidence levels which in turn results in better value of the stock.

The Bank has vastly improved in terms of all key financial parameters like NIM, Gross/Net NPA ratios, PCR, CASA Ratio, Capital Adequacy Ratio, besides gradually improving its bottom-line i.e. profits. The improvement in financial metrics of the Bank amply reflect in its share price, which has seen a steady rise since declaration of our Q2 results.