Notes bank’s exorbitant interest rates
Excelsior Correspondent
Srinagar, Oct 28: The Federation of Chambers of Industries Kashmir (FCIK) today stated that the deposit profile of J&K Bank has been crucial in sustaining its margins and profitability, attributing the bank’s success entirely to the support of depositors from J&K.
In a statement issued here, the apex industrial chamber called on J&K Bank to prioritize cultivating long-term loyalty among its local customers, recognizing that their profitability depends on this relationship and is vital for the bank’s sustainable growth and resilience.
Attributing the bank’s profitability solely to depositors and borrowers from the J&K region, FCIK warned that the bank must not risk losing their support and loyalty in the future.
Providing details, FCIK highlighted that of the total deposits amounting to Rs 137,918 crores, an impressive Rs 123,000 crores originated from the J&K region, accounting for 89%.
“The Current Account Savings Account (CASA) ratio has given J&K Bank a competitive advantage over its counterparts, with 48.60% of its deposits (nearly half) stemming from ‘no-cost’ or ‘low-cost’ current and savings accounts,” stated FCIK, adding that despite receiving no interest from the bank, current account holders were being charged for every little service.
FCIK also highlighted that the cost of deposits for the bank has remained the lowest among Indian scheduled commercial banks, standing at 4.4% in the financial year 2023-24.
“In previous years, this cost of deposits stood at 3.8%, 3.65%, and 4.10% for the financial years 2022-23, 2021-22, and 2020-21, respectively.”
FCIK reiterated that this deposit profile has been crucial in sustaining J&K Bank’s margins and profitability, attributing this success entirely to the unwavering support of local depositors.
The body also credited J&K Bank’s success to its majority Government ownership and its role as the agency bank for the Union Territory of Jammu and Kashmir.
“This relationship has allowed the bank to consistently attract retail deposits, as all transactions related to the UTJKL Government, including employee salaries, are routed through J&K Bank.”
The chamber also noted with concern that interest rates charged to borrowers have been exorbitantly higher than those charged by banks across India, on the pretext of a volatile law and order situation and the need to cover market risks.
“There are instances where even the poultry industry under the agriculture segment has been overcharged by 4-5%.”
Despite the challenges faced by local borrowers, the bank’s Non-Performing Assets (NPA) ratio has significantly decreased to 3.95% from 8.7% in the financial year 2021-22.
This improvement is primarily attributed to the determination and commitment of local borrowers to repay their loans, with many resorting to selling ancestral properties in response to the coercive methods adopted by the bank, FCIK said.
However, FCIK has sought clarity on the reduction of NPAs, especially in light of reports indicating that substantial loans outside the Union Territory have been written off due to their unsecured status.
The chamber observed that the bank’s anti-customer approach and use of coercive methods are rapidly alienating its loyal customers, many of whom have already switched their allegiance to other banks, while others are contemplating similar moves.
“The bank could face significant challenges if it loses the support of its local customer base, which is crucial to its survival.”
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