clearly stagnant | Life in Kashmir

Data revealed on banking operations in Jammu and Kashmir over the past six months suggests an improvement in business lending and the progressive depletion of advances and a weak appetite for credit in local markets, Massoud Hussein reports

Dr Arun Mehta (IAS), Chief Secretary of Jammu and Kashmir during a function of the Bank of Jammu and Kashmir in Kashmir. Image: DIPR

If the figures submitted during the last bankers meeting for the first half of fiscal year 2021-22 are one indication the economy is slowing in Jammu and Kashmir. Deposits were slightly lower at the end of fiscal 2020-21 and loan portfolio growth is modest. Strained accounts have increased over the past six months.

Although the Bank of Jammu and Kashmir continues to be the key player in Jammu and Kashmir’s deposit and credit management, over the past six quarters, the State Bank of India (SBI) has posted an unprecedented growth trend in its credit due to the huge business loans. These large companies, which operate mainly outside of Jammu and Kashmir, have developed their business interests in Jammu and Kashmir in recent years. It could be related to the new industrial policy of the government of Jammu and Kashmir which wants to bring a huge investment.

The banking sector has set itself the goal of extending credit by more than Rs 44,980 crore for the current budget in priority and non-priority sectors in Jammu and Kashmir. In the first six months, forty percent of the achievement is announced, more in commercial loans than in the priority sector. In the last fiscal year, 2021-2021, banks only completed 69% of a Rs 44,630 crore credit plan. Interestingly, the personal loan, interestingly, has shown a huge appetite.


As of the end of September 2021, banks operating across Jammu and Kashmir have Rs 148,539 crore in their vaults. This is slightly less compared to the end of the previous fiscal year when it was Rs 148,677 crore. It basically means that people are spending their earnings or that they don’t have much to keep with the banks. The numbers at the end of the year are usually up for deposits, a situation that changes dramatically the rest of the year. Banks, however, said September 2021 deposits were 6.34% higher than they were a year ago in September 2020, at Rs 13,984 crore.

What’s interesting is that JK Bank continues to hold the bulk of the deposits – Rs 93,722 crore, which is 63.09% of the entire savings vault in Jammu and Kashmir. It is followed by the SBI with Rs 20,08.39 crore, PNB by Rs 9,925.16 crore and HDFC Bank by Rs 5,492.80 crore.

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Jammu and Kashmir’s entire loan portfolio at the end of the first half of the current fiscal year stood at Rs 82,085.18 crore, a slightly improved figure from Rs 77,867.37 crore at the end from March 31, 2021, by Rs 4,217 crore. Data suggests credit underwriting has improved 16.59% in 12 months, but over the past six months the improvement has been fairly small, indicating a low appetite for credit.

Of the entire loan portfolio, JK Bank manages 69 percent, followed by SBI with 14 percent. All other banks have a credit share of no more than four percent of the overall loan portfolio.

What is interesting is that SBI is emerging as a major player in corporate finance, a status that was previously that of JK Bank. At the end of September 2021, SBI advanced Rs 4,717 crore as corporate advances, which is almost three times more than Rs 1,758.22 crore that it advanced for the company a year earlier. JK Bank’s corporate advances amount to Rs 486 crore, slightly less than those of PNB.

Banks, however, have said advance growth on an annual basis is over 16%, which is not bad. What is interesting, however, is that the net addition in the loan portfolio for the year ending September 2021, is Rs 11,681 crore of which Rs 5,743 crore is the company’s advance leaving less than half (Rs 4238 crore) which was advanced to non-business in Jammu and Kashmir.

Credit deposit ratio

Normally, the credit / deposit ratio is taken as a basic indicator of how the banking sector is functioning in a particular space. The overall sector CDR is 56.58 percent. Usually JK Bank had a better ratio, but advancing a good amount to the corporate sector significantly improved the SBI count. Currently, the CDR for SBI is 75.42 percent and that of JK Bank is 57.04 percent. Even PNB has a CDR of 24.31 percent.

Credit appetite

The regions of Kashmir and Jammu have traditionally exhibited a contrast in appetite for credit. While Jammu has a low thirst for credit, it is completely reversed in Kashmir. Kashmir has less money in bank vaults than Jammu; thanks to the operations of large enterprises in Jammu including the central public sector. This is what the credit-to-deposit ratio shows.

In Jammu, for example, banks hold total deposits of Rs 88,989.27 crore and the total drawdowns at the end of September 2021 was Rs 33,058.50 crore. That makes a modest CDR of 37.15 percent. The banking sector only has Rs 1,840.52 crore as gross postcode in the region.

Kashmir is another story. He only has 55,806.09 crore in deposits against which the advances amount to Rs 41,545.67 crore, bringing the CDR to 74.45 percent. Obviously, stressed workers are also in this proportion. Gross NPAs in Kashmir are Rs 3,161.51 crore.

There is yet another interesting trend. For many years, it was the small neighborhood of Shopian that led the credit rankings across Jammu and Kashmir. It still is. Against a deposit base of Rs 1,138.34 crore, the advances amount to Rs 1,831.69 crore at the end of September 2021, making a CDR of 160.91%. The fascinating addition is that this is one of the lowest NPA districts with a gross NPA of Rs 51.52 crore, or 2.81%. This means that people seek help from the bank and also pay back.

The emerging trend is that it’s Kupwara chasing Shopian. Against a deposit base of Rs 2,871.84 crore, the overall advances were Rs 3,304.42 crore. While its CDR stands at 115.06 percent, the border district is unable to properly manage its stressed assets. The gross NPA in Kupwara stands at Rs 141.90 crore, or 4.29%.

Jamia Masjid Shopian.  Image from KL: Bilal Bahadur
Jamia Masjid Shopian. Image from KL: Bilal Bahadur

The district to see by the end of this fiscal year would be Budgam in central Kashmir, which currently has a CDR of 98.78%. However, Budgam manages its assets better as it has gross NPAs of Rs 101.16 crore, which is only 3.06%. While in Shopian’s case, Apple is the primary driver, it could be real estate that is stimulating the appetite for credit in Budgam.

No district in Kashmir has less than 50 percent CDR. The lowest credit deposit rate, it is worth mentioning here, is the capital Srinagar, which has a rate of 53.88 percent. Against the deposit base of Rs 26,686.46 crore, the advances amount to Rs 14,379.42 crore. On these assets worth Rs 2,120.15 crore (14.74%) are under stress. Essentially, this means that the business in Srinagar is in serious jeopardy and is paving the way for taking over the outskirts.

In the Jammu region, Doda leads the appetite for credit (CDR 55.77%), followed by Ramban with 49.91%. The city of Jammu, the former winter capital of Jammu and Kashmir, is advancing at a turtle pace. Against a deposit base of Rs 51,517.74 crore, the advances amount to Rs 16,240.5 crore, making a CDR of 31.52 percent. The gross NPA amounted to Rs 1,404.67, or 8.64% of the overall advances. Most of the affairs of Jammu are closely related to Srinagar in particular and Kashmir in general. The situation in Srinagar could be linked in one way or another to a weak economic situation in Jammu as well.

Essentially, this means that most of the income generated by the banking sector comes from Kashmir, as banks only take loans.

Priority V / S No priority

At the start of the current fiscal year, the banking sector set itself the objective of advancing an amount of Rs 44,980.57 crore in 12 months ending in March 2022 in priority and non-priority sectors. Cumulatively over the first six months, achievement has been in the order of 40 percent. But the analysis suggests that six-month achievement was 88 percent in the non-priority sector and only 27 percent in the priority sector. Priority sector loans are fundamental for banking operations because they are government-focused and in some cases the government pays part of the interest.

The sub-sector that has experienced massive growth in both priority and non-priority areas is personal lending. Rs 5,309.48 crore is the amount that has been spent in the category of personal loans. It is higher than the key priority sector, agriculture, which only took Rs 5,037 crore. Housing, education, industry, all sectors show stagnation, even negative growth. Overall, non-priority loans show a doubling trend compared to the non-priority sector. The massive surge in personal loans is seen as an indicator of growing indebtedness at the individual level, possibly driven by weak growth in the economy.

Jammu and Kashmir Bank Headquarters in Srinagar

Stressed workers

The aggregate gross non-performing assets of the banking sector in Jammu and Kashmir stands at 6.62 percent of Rs 82,085 crore. The NPA was 5.98% in September 2021, which means it rose 2.01%. Compared to March 2021, when the gross NPA was 6.47%, it appears to have only increased 0.15% in the past six months.

The NPA trend is most visible in the industry which has 9.23 percent of the overall progress of Rs 19301.52 crore (Rs 1780.57 crore) under stress. This is followed by agriculture which has aggregate advances of Rs 10,706.11 crore of which 904.71 crore (8.45 percent) is under stress. Banks advanced Rs 6,947.6 crore under PMMY (Mudra), of which Rs 235.9 crore is gross postcode (3.40 percent).

There is also a flaw in government sponsored programs. It is on the order of Rs 5.03 crore of Rs 254.31 crore in NRLM (1.98 percent), Rs 30.20 crore in an overall advance of Rs 1450.57 crore in PMEGP (2.08 for hundred); Rs 6.26 crore to Rs 97.58 crore advanced under NULM (6.42%) and Rs 1.6 crore from Rs 40.66 crore advanced to SC, ST and OBC (3.94%). The NPA under the Kisan credit card is Rs 261.58 crore (4.45 percent).

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