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J&K Bank — the ‘RBI of Kashmir’ — is in crisis and its customers are taking it personally

J&K Bank was thrust into a crisis this month as chairman Parvez Ahmed Nengroo was removed amid allegations of corruption.

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Srinagar: In the late 1980s, when an armed insurgency erupted in Jammu & Kashmir, it took a heavy toll on the state’s banking sector. The big banks like State Bank of India and Punjab National Bank began to shut down their branches and scaled back.

But one, the prestigious J&K Bank, kept banking alive in Kashmir for decades, and was closely tied to the people’s aspirations of economic sovereignty. It was almost like the ‘RBI of Kashmir’.

However, with a host of charges related to corruption, political collusion and irregularities in recruitment, J&K Bank is in the news for all the wrong reasons today.

On 8 June, the authorities removed the bank’s chairman Parvez Ahmed Nengroo and raided his house on Residency Road in Srinagar’s Lal Chowk. Allegations against Parvez Ahmed include offering loans worth crores to people recommended by politicians, placing his relatives in plum positions, and using funds meant for the bank’s CSR (corporate social responsibility) initiative for the beautification of Srinagar’s Royal Spring Golf Course, mostly used by Kashmir’s elite and powerful.

The Jammu & Kashmir Anti-Corruption Bureau also raided the bank’s headquarters, and the house of Srinagar’s mayor. As the bank’s stocks crashed this week, the government set up a search committee to find the next head. For a bank that was rich, independent and tied to the Kashmiri pulse, the raids have left many people feeling gutted.

In a state that is quick to give into knee-jerk suspicions of New Delhi’s intentions, the raids and cases against J&K Bank have triggered a lot of anxiety.

Some suspect that this is New Delhi’s plan to break the back of Kashmir’s economy, and stop easy small loans to local businesses and families. Others see this as a move by the Narendra Modi government to tighten the noose around wealthy mainstream politicians and kill regional politics by starving them of funds.

The most alarming conspiracy theory suggests that New Delhi will replace mid- and lower-level staff of the Srinagar-based J&K Bank with Jammu residents.

Standing strong

J&K Bank has shepherded the state’s economy and financial activity through the violent decades even as investment dropped and tourism crashed.

The 2017 economic survey conducted by the state government found that, on average, one bank branch is available per 6,185 residents of the state. Compare this to the national average of a bank per 8,708 people. It has been the lifeline of local economy.

Over the years, the bank has even taken on the role of a quasi-government institution, entering into all the significant and not-so-significant areas of life in J&K – including disbursing salaries to government employees and developing state infrastructure under its CSR initiatives.

In 1989, it had only 280 branches. Since then, the bank has grown monumentally and opened 940 branches across India, 812 in the state alone.

The majority of the branches (504) are in rural areas. The aggregate business of the bank stood at Rs 1.4 lakh crore at the end of financial year 2017-18, with a growth of 10.41 per cent, according to bank documents.

For Baramulla apple-grower Mohammad Yosuf (51), his two-decade-old relationship with J&K Bank is a very personal one. Back then, he could just grow 1,000 boxes of apples a year, just enough to meet the expenses and attend to his family’s basic needs. But loans from the bank helped him buy more land and grow his business four-fold.

“The loans offered to farmers have really helped us pull through,” Yosuf said. “There have been times that I wasn’t able to pay instalments on time, owing to turbulant times here. But the bank understood what it means to do business in Kashmir. Will any other bank representative be so patient?”

The raids and the investigations now pain him. “The bank has been there for us and we have conducted our work through it,” he said, “This balance in the relationship shouldn’t be disturbed.”

Dr Javaid Iqbal Khan, a senior assistant professor at Kashmir University’s Department of Economics, said J&K bank had contributed a lot in breaking the “cultural bias” towards banking.

“There is a well-known cultural bias against the banking sector in Kashmir, and this psyche of people has changed over time,” he added, “J&K Bank contributed majorly towards this.”

Speaking to ThePrint, many people said they were confident that the bank is here to stay and, no amount of intervention, especially political, can hit it.

After all, many past moves to dilute the powers of J&K Bank have been opposed by the entire political spectrum, mainstream and separatists alike. But to understand what is J&K Bank, it is important to understand its history and place in the troubled state.

Also read: Raids continue at J&K bank, a day after chairman sacked

It’s 81 years old

J&K Bank was founded in October 1938 during the rule of Dogra King Maharaja Hari Singh, and it became the first bank in the country to emerge as state-owned.

The first shareholders of the bank included the government of Hari Singh and top ministers of the J&K administration, including the then prime minister N. Gopalaswami Ayyangar. The board of directors included prominent social activist Pandit Sriniwas Magotra and top business investor Abdul Aziz Mantoo.

It continues to be the only bank in India where the state government holds a majority stake. In all public-sector banks, the majority stake is held by the Centre.

“When every other bank was shutting branches, J&K Bank played the role of the state’s backbone and continues to do so,” said former J&K Bank chairman Mushtaq Ahmed, whose tenure ended in 2016.

“Nearly 90 per cent of the people in the state have accounts in J&K Bank, and the bank provides services to 90 per cent of business in the state. J&K bank has no parallel in the state or in India,” he added.

Economists, experts, politicians and anthropologists, based in and outside of Kashmir, say the bank has embedded itself into the social fabric of the state, and that the masses have an emotional connect with it.

The bank provides numerous financial services, including some described as humanitarian. “Take, for example, the ‘Debt Swap Scheme for Farmers’,” said Professor Khan, “The purpose of the scheme is to provide finance to farmers to repay their outstanding dues to moneylenders. There is no other bank in the country that provides such a service.”

Over time, J&K Bank has not only provided loans to farmers, small businesses, craftsmen, artistes, and students, but also those who wanted to buy cars and get married, even remarried. It hired nearly 10,000 employees, especially from non-banking and non-technical backgrounds, the vast majority of them from J&K.

“Had the bank limited its recruitment parameters based on banking experience, hundreds would have been forced to leave the state,” said a mid-level J&K Bank official. “I won’t be wrong to say that every locality in Kashmir has at least one J&K bank employee.”

Under its CSR initiatives, the bank has developed some of Kashmir’s prominent tourist spots, including the Badamwari park.

Nishita Trisal, who is pursing her doctorate at the University of Michigan, US, said she was “astonished” to see the bank’s relevance among locals when she first visited the state over a decade ago.

“Even small roadside carts had the logo of J&K Bank on them. It was really something,” Trisal told ThePrint over the phone. Years later, she started research on J&K Bank as part of her PhD on the state’s economy, and has since worked extensively in the state to find out more on the political volatility in financial institutions and the idea of economic sovereignty in J&K.

“It is important to understand J&K Bank’s relationship with the people and the conflict,” Trisal said. “J&K Bank grew to what it is despite an environment of uncertainty. Whenever others banks left, J&K Bank stayed on, and that somehow gives people here a sense that nothing can happen to it,” she added.

3,000 appointments under lens

The current troubles of J&K Bank began when a massive controversy broke out last year in October, as Governor Satyapal Malik accused the bank of appointing employees on the basis of political recommendations. The issue brought the bank’s management and Malik at loggerheads with each other. However, after grabbing headlines for a few days, the matter died again.

Then, this month, the state ACB, formed just a few months ago, filed an FIR to probe allegedly illegal and fraudulent appointments in the institution during the tenure of the erstwhile BJP-PDP government (2015-18).

According to the FIR, a copy of which is with ThePrint, as many as 3,000 appointments are under the ACB’s lens. The complainant has also claimed workers of the Peoples Democratic Party (PDP) were appointed as banking attendants (BA) and assistant banking associates (ABA) through the backdoor, “causing a heavy strain on the bank’s finances”.

Citing an example, the complainant said one branch in north Kashmir had made seven illegal appointments. “You (ACB) can visit and enquire from various bank branches and find out about these fraud appointments,” the complainant added.

The complainant further alleged that the former chairman had refused to regularise the services of hundreds of meagerly-paid sweepers, citing financial constraints. “Then, howcome he made 3,000 fraud appointments of relatives of PDP leaders in the bank?” the complainant stated in the 8 June complaint.

A senior leader in the PDP, who was part of the BJP-PDP government, said the Centre had, on multiple occasions, exerted pressure on the party to change how things operated in J&K Bank, claiming a ploy to bring it under the union government’s greater control.

PDP leaders say the recent removal of J&K Bank chairman Parvez Ahmed, who was appointed in 2016 during the tenure of the BJP-PDP alliance, marked the continuation of a plan to destroy J&K Bank. The charge was denied by the state administration, which said last week that the bank was in “safe hands”.

“If they are so sincere about changing things for good (in J&K Bank) and removing the chairman is a stepping stone to cleaning up the bank, then howcome they wanted to convert it into a state-owned PSU with the same chairman at the helm of things?” said the PDP leader requesting anonymity.

“They are betraying the people of J&K by destroying our economic sovereignty,” the leader added.

However, a senior civil servant said making appointments as favours to either influential people or relatives of bank employees had been the norm at J&K Bank. “The negative publicity earned by J&K Bank is not because of its servicesm but because of these appointments. A lot of people here do believe that the bank gave away a lot of bad loans. They want accountability,” said the official.

According to J&K Bank data, of its total non-performing assets (NPA) of Rs 6221.35 crore, only Rs 1618.75 crore are from the state.

Also read: This is why govt takeover of J&K Bank is not a big deal

‘Lender of last resort’

Even though people here are aware of all that was wrong with the bank, many see the raids as part of the Centre’s plan to “tame” J&K Bank, citing a history of similar initiatives.

Former chairman Mushtaq Ahmed said the first challenge to J&K Bank’s power came during the nationalisation of banks under the Indira Gandhi government.

But the state government of the day, led by National Conference leader Sheikh Abdullah, resisted the attempts, he added. The aim was to give the RBI powers over the bank under the ambit of nationalisation. But Abdullah’s government threatened a mass agitation, and also lobbied hard with New Delhi to stall the decision, he said.

Observers say similar attempts have been made to change the status of J&K Bank over the last decade. The bank is known as being the “lender of last resort” – whenever the state government is short of funds for schemes or salaries, the bank has bailed it out.

Even this status was taken away when the RBI was given the responsibility to conduct the bank’s business, especially fund use, in 2011.

In 2017, the state government infused Rs 532 crore as additional equity, thereby taking its share in the bank from 53 per cent to 59.23 per cent.

Last year, the State Administrative Council, led by Governor Satyapal Malik, approved a proposal to make Jammu & Kashmir Bank Limited a public sector undertaking that is accountable to the state legislature. The move was reversed amid an outcry. J&K Bank is currently accountable to the state government.

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  1. The column could have mentioned the annual net profit made by the bank over the last five or even ten years. 2. Given the role the bank has played in the life of the state and its people, care should be taken to allay popular fears that there could be a political motive to recent actions. 3. Given how disturbed Kashmir has been in recent years, long shutdowns of life and commercial activity, the effect on tourism, the Bank has certainly had to navigate stormy seas.

  2. What a load of claptrap. The whole world knows that j&k bank is one is not only the Mecca of corruption but also a route for terrorist funding. It’s about time the government cleaned it up

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