J&K Bank scrips a big growth story for its platinum jubilee
In 1938 when Kashmir’s autocratic Maharaja issued the Rs 5000 cheque as payment towards the corpus for setting up the J&K bank, it bounced for lack of cash in his treasury.
“The bank is poised to open new chapters, new hopes and new opportunities for the people of state particularly youth,” Chairman and CEO Mushtaq Ahmad told shareholders at the weekend AGM. “We have a set plan of growth and expansion and we are implementing it.” The Board has approved a 335% dividend for the lat fiscal.
The bank with state government as its majority shareholder has already achieved a business turnover of Rs 86432 crore as it pocketed a net profit of Rs 803.25 crore in March 2012. It might have done much better had not the state government entered into a tripartite agreement with the RBI and the Union Finance Ministry under which the RBI took over as the debt banker of the J&K government in lieu of state government getting a one-time Rs 1000 crore grant to manage its overdraft. Reinvesting a huge amount adjusted by a single account holder added to costs and led to a wide disbursal in parking and inviting the funds. But it helped bank to prove the allegations wrong that it was earning out of the government business.
Even after its relationship with the government was downgraded by ruling coalition, the bank’s grip over the market in the state is next to none. See the details: 64% of deposits with the banking sector, 67% of the advances, 61% of the overall priority sector advances, 68.44% of the non-priority advances, 70% of agriculture lending, 60.33% of the advances to MSME, 49.43% of lending to education sector and 71.20% of the loans to housing sector in J&K state is owned and managed by the J&K Bank. “This is despite the fact that we only own 33% of the overall banking network in the state,” Ahmad told The ET. “We believe good banking requires a higher level of commitment and that is what is paying us.”
Its close linkage with the state economy makes it a major player in the state. Its AGMs offer an idea of how big its marginal shareholders think of state’ only listed company. This weekend, a poet shareholder had scripted a song for the company and but the meting was so tightly managed that he could not recite it. There are people talking about its failure in not ensuring that every shareholder gets a yearly wall calendar and a diary. They are always in demand because they list the exact days of holidays! Even one shareholder suggested the bank to set up one model school in every block, a demand Ahmad rejected instantly.
“We appointed nearly 1500 youth last year and we plan to recruit many more this year because we are expanding,” Ahmad told the meting.”But do not expect us to become teachers and recruiters of all sorts because that is not our competence.”
But to reach R 100 thousand business, the bank has its script ready. Its focus shall remain at the home turf because it understands the local market and can service it much better a compared to the non-J&K network that will remain special branches. Ahmad told the AGM that in near future 70% of the overall branch network would be within J&K. Bank has identified areas of focused attention so that the growth story is achieved well.
Take the case of apple and Kashmir produces 77% of the total apples that India produces in a year. Under the Apple project, J&K Bank sees triggering around one lakh crore revenue by the end of current fiscal. In the first quarter, its chairman told the AGM the bank has sanctioned Rs 85.83 crore advances to the apple sector and Rs 67.89 crore was actually disbursed.
Apple, Ahmad said offers clear grey area. “In a survey we found 290000 individuals or firms into the trading of apples but only 10000 were working with the banks,” Ahmad said. “We have launched a drive and by now 1300 unbanked apple traders are with us.” Around 75% of the apple growers are funded by informal financing channels and only 10% work with banks.
Interestingly less than on percent of the apple is preserved in Kashmir for off-season marketing using the controlled atmosphere storage facilities. Bank has taken an exposure of Rs 105 crore for establishing five CAS facilities and it ha triggered a trend and a thirst for more capital. “All these areas indicate that J&K holds the key for lot of investment and very penny will pay back,” said one of the executives.
Basmati in Jammu is gradually getting big after the government withdrew an order that impacted exports. At the same time the government is inviting a huge amount to help the famed rice to make a mark at the international markets.
The impact has been instant. Against export of 63 tons in 2010-11, it has jumped to 135 ton in 2011-12. Most of the basmati exporters are with J&K Bank and these included certain units with a turnover of Rs 100 crore. “The more export, the more requirements of funds and that help the overall business grow,” said the executive associated with the policy scripting.
Energy, the bank executives assert, is the new sunrise sector in the state. By the end of March 2012, the bank had an exposure of Rs 326.52 crore and in the current fiscal it is adding a credit line of Rs 810 crore to the sector. But that is true with other areas of infrastructure. The bank has sanctioned a credit of Rs 400 crore to part finance the four-laneing of the highway project in the state.
“We may do something more in the handicrafts,” the executive not authorized to speak officially said. “It is also possible that we might have crossed the targets midyear.”