The Jammu & Kashmir Bank Ltd on Monday said there would be no bottom line growth in the bank’s profits during the coming 18 months due to increase in non-performing assets (NPAs) and the ongoing turmoil in Valley has further complicated the bank’s financial health.
The newly-appointed chairman and chief executive officer of J&K Bank, Parvez Ahmed said that there will be “no dividends, no tax provision and no contribution to the CSR” for next at least one-and-a-half year. Ahmed said the bank would focus on consolidation and cleaning up of the balance sheet for the next 4-6 quarters with a moderate growth in the range of 10-15 percent.
Parvez said since 80-90 per cent of the bank’s NPAs are from rest of the India and not J&K, the cleanup and consolidation process would exclude J&K state. “So far as J&K state is considered we have major role to play..
We need to pursue the agenda of the economic empowerment of the J&K state but the NPA part will be taken care of,” he said.
“Our NPA coverage ratio which was considered one of the best in the industry has diluted considerably during the last two–and-a-half year. From 94 per cent it has come down to 50 per cent and with further losses there are chances if we will not provide sufficiently and effectively in the balance sheet the coverage ratio will come down, losses will have the impact on network which will also require J&K Bank to augment its capital base,” he said.
J&K Bank chairman said he was moderating the growth targets and not stopping it. “What we are doing instead of registering the growth of 25-30 per cent which is not happening at present but the kind of targets which we have given to our business units is in the range of 20-25 per cent. I would like to moderate those targets in the range of say 10-15 per cent”.
Parvez said some of the bank’s assets which have been restructured and are under stress are not turning around and these slippages will continue further.
“The situation has become further complicated on account of the unrest in J&K state. In the given circumstances we feel that against a profit of 460 crores which we have registered during the previous financial year there will be no bottom line growth during the current fiscal and also this may continue in the 2nd half of next financial year. There will be no dividend no tax provisions, no contribution to the CSR for next atleast one and a half year,” he said.
He added that the bank would reduce “the impaired exposure in the stressed asset portfolio through legal recourse, one-time settlement and through the asset reconstruction company”. Parvez said the bank’s NPAs are in the range of around 10 per cent coupled with the stressed asset portfolio of around 10 per cent that amounts to 20000 crore.
“I am paying interest on one side and getting nothing return on other side. I want to ensure that if there are any ARCs interested in the portfolio who will buy it. We can also encourage one time settlement and focus on that. We will also see the legal recourse available for quick recovery,” he said.
Parvez said the bank has a different role in J&K and it has to ensure the economic development in the J&K state. “I have made it very clear that so far J&K state is concerned, since we have developmental role here, J&K Bank is not stopping the finance to the sectors in the J&K state because our role is quite dominant and vital here,” he said.
“We are passing through a very tough situation. We have been managing the growth in this fragile environment for the last two decades so we are highly trained to manage these kind of situations that’s why I am looking confident even if the Kashmir province is not looking good we are trying our best to gear up our efforts in other parts which are not affected by disturbances,” he said.