Srinagar, Nov 6: The Federation of Chambers of Industries Kashmir (FCIK), the apex industrial body in the region, has raised grave concerns over the Jammu and Kashmir Bank’s (J&K Bank) chronic inability to fulfill its Priority Sector Lending (PSL) obligations. This persistent shortfall, which has reached an alarming ₹8,372 crore as of September 2024, is severely hampering economic growth, job creation, and entrepreneurship development in the Union Territory of Jammu and Kashmir.
In a strongly worded statement, FCIK expressed its deep regret over the J&K Bank’s failure to allocate the mandatory 40% of its total advances to the priority sectors, which include agriculture, micro, small and medium enterprises (MSMEs), education, housing for the underprivileged, social infrastructure, renewable energy, and exports. These sectors are crucial drivers of employment and poverty alleviation, particularly in the underdeveloped regions of J&K.
“The J&K Bank’s continued neglect of priority sector lending is not merely a financial oversight but a direct blow to the economic future of Jammu and Kashmir,” the FCIK observed, highlighting the far-reaching consequences of this credit shortfall on the local economy.
The industry body disclosed that the bank’s PSL shortfall has forced it to park the entire ₹8,372 crore in the Rural Infrastructure Development Fund (RIDF), leading to a substantial financial loss. While these funds earn a meager interest rate of 2.5% to 2.75% from RIDF, the bank is obligated to pay its depositors a return of 7% to 8% on their investments, resulting in an average cost of deposits of 4.4%.
Regretting the missed opportunities, FCIK pointed out that these funds could have been better utilized to support local businesses and stimulate much-needed economic activity in the region. The chamber also noted that the bank’s modest growth in advances, a mere ₹690 crore, was insufficient to provide the necessary boost to the struggling economy of Jammu and Kashmir.
Emphasizing the urgent need for corrective action, FCIK has called upon the J&K government, both in its capacity as the representative of the people and the majority shareholder of the bank, to intervene and ensure that critical sectors receive the funding they require.
“The government must also address the insensitive approach of the bank’s management and board, as their continued neglect of priority sector lending is not merely a financial oversight but a direct blow to the economic future of Jammu and Kashmir,” the chamber observed.
The FCIK also highlighted the bank’s failure to comply with the directives from the Union government and the Reserve Bank of India (RBI) regarding the restructuring of loans for MSMEs, despite the Supreme Court’s ruling in August 2024 that deemed these directives mandatory. The chamber noted that this has further intensified the bank’s “name and shame policy” against micro, small, and medium enterprises, exacerbating the economic crisis.
Aspiring entrepreneurs in the region also face an even bleaker outlook, as the bank insists on collateral and personal guarantees, despite these entrepreneurs being entitled to funding under government-backed schemes designed to support emerging small businesses.
The FCIK has also called for a comprehensive review of the J&K Bank’s operational strategies and financial practices, pointing out discrepancies in the bank’s financial results and questionable adjustments made to present a more favorable profit outlook.
The industry body’s urgent appeal for government intervention and corrective measures highlights the critical importance of the J&K Bank’s role in fostering economic development and supporting local businesses in the Union Territory. The bank’s persistent failure to meet its PSL obligations has become a significant barrier to the region’s growth and prosperity, underscoring the need for immediate and effective action to address this pressing issue.
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