Excelsior Correspondent
Srinagar, Dec 10: The Federation of Chambers of Industries Kashmir (FCIK) today demanded an investigation into what it termed as “unethical” and “illegal” practices by J&K Bank in “excessive” and “discriminatory” demands for collateral securities against loans.
In a statement, the apex industrial chamber expressed concern over extreme actions taken by the bank, including the publication of e-auction notices for properties, including residential houses, mortgaged by businessmen as collateral.
The Chamber emphasized that collateral securities are an additional layer of protection imposed on borrowers, requiring them to pledge assets beyond the primary security, such as factory buildings, plant and machinery, and stock.
“It has long been a common practice for banks to demand personal or ancestral assets, including residential properties, as additional collateral to secure loans. This extra layer provides further protection in case of default, on top of the primary security tied to the loan,” FCIK said.
According to FCIK, loans are typically used by enterprises for purposes such as building construction, procurement of plant and machinery, and purchase of raw materials.
“Similarly, retail trade loans are used for purchasing goods for sale, while agricultural loans are taken for crop cultivation.”
However, FCIK pointed out that the bank, under the pretext of adhering to so-called standard operating procedure (SOP), declares an account Non-Performing (NPA) after just three months of default in loan servicing.
“This is immediately followed by a notice under the draconian SARFAESI Act, demanding full repayment of the loan along with interest,” informed President FCIK Shahid Kamili.
He added that the bank takes this step “without” attempting to understand the reasons for the default and without adhering to mandatory guidelines issued by the Government of India (GOI) and the Reserve Bank of India (RBI).
“In most cases, the collateral demanded is excessive, sometimes several times the loan amount, violating regulatory norms which is evident from the e-auction notices published daily in newspapers,” Kamili said.
FCIK stated that these practices not only violate national banking regulations but also expose the bank’s exploitative approach toward local businesses, particularly MSMEs and women entrepreneurs.
The Chamber has urged the Government to intervene and scrutinize the excessive collateral demands, as well as the bank’s failure to implement national collateral-free schemes designed to support local businesses.
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