Resentment, Apprehension in Kashmir After Guv Puts J&K Bank in Public Sector

Srinagar: A day after dissolving the Assembly on November 22, J&K Governor Satya Pal Malik gave a nod to the proposal to change J&K Bank Ltd to a Public Sector Undertaking (PSU). The decision has stirred controversy in the restive state.

J&K Bank is licensed as an “old private-sector bank” and is the only state-owned bank in the country. The state government holds 59.3% of the bank’s stake. The majority stake in all other public-sector banks is held by the Government of India.

The decision of the State Administrative Council (SAC), headed by Governor Malik, to change J&K Bank to a PSU has been criticised widely. It is being termed as a “seemingly economic intervention with political undercurrents.”

Former finance minister of the state, Haseeb Drabu, called the decision as “thoughtless and regressive” which will be an “unqualified disaster”. Drabu has also served as the chairman of J&K Bank.

“It will have a very negative impact on the bank and its functioning. There is no way that the state will benefit from it,” Drabu said in an interview with the Greater Kashmir.

Questions have also been raised on the autonomy of the bank. “The institutional autonomy of decision-making will be impaired and all commercial decisions can be questioned for one reason or the other,” Drabu added. He also said with this decision, the bank will open up to many masters.

As a PSU, the bank will be accountable to the state legislature.

Drabu said the bank has been “downgraded and put at par with any other state public sector undertaking” in the state. Other PSUs in the state are in shambles and it is being feared that J&K Bank will meet a similar fate.

“All the other PSUs in the state are unsuccessful. The bank is going to have the same fate,” said Khurshid Ahmad Bhat, professor of finances at the University of Kashmir.

“It is a wrong decision and will tell upon the autonomy of the bank. They need to have innovative products and pricing and for that, they need autonomy,” said Prof Khurshid.

The decision will expose the working of the bank to more political interference. That is where the experts find a problem.

“PSUs in the state are in worst condition because of the political interference. You need to be very innovative and transparent; bureaucrats will not be able to handle it,” said Prof Khurshid.

Former chief minister Mehbooba Mufti said that putting J&K Bank in public sector will lead to further alienation of the state.

“This decision will add to the woes of the state and alienate it further,” she wrote on Twitter. She said that she talked to Finance Minister Arun Jaitley about the “intrusive” and “regressive” move.

While Omar Abdullah termed the move as a “disturbing development”, Sajad Lone of People’s Conference rejected the changes made to the bank’s status.

“I register my unambiguous rejection of changes being made in the J and K bank. And it needs to bereft of Govt control not drowned in Govt control. This is literally the sole lending institution and lending decisions should be commercial decisions outside the ambit of politics,” Sajad wrote on Twitter.

Senior Kashmiri journalist Masood Hussain termed the decision as an “economic intervention that seemingly is political.”

“Over the years, the bank has evolved into a sort of a development bank and regulator of almost all the banking sector in the state,” Hussain told News18.

“The bank has a peculiar characteristic in the state. From local business to the policy intervention of government, everything is gaining through J&K Bank in our state, which puts it under extra social responsibility. It has local stakes,” he said, adding that by the decision the bank will “lose its characteristic”.

“The bank's control will be taken by the system gradually. It will affect its character as more institutions will poke nose,” he said.

However, there have also been allegations of irregularities in J&K Bank over the recruitment process and about the Non-Performing Assets (NPA). As a PSU, the bank will come under the purview of Right to Information (RTI).

“Bringing bank into RTI is good. There were some irregularities. Political appointments were made on top posts,” said Prof Khurshid.

Earlier in October, Governor Malik had alleged that political workers were being appointed in the bank.

He said during the PDP-BJP regime, the entire selection list of 582 candidates in J&K Bank was set aside to appoint political workers in their place. Later, these candidates were appointed in the bank on Governor’s order.

Former finance minister Drabu said that the bank could be brought in the purview of RTI without putting it under the PSU framework.

“I am all for transparency, but it should not jeopardise commercial functioning of the bank,” he told a newspaper.

Former J&K Bank chairman, Mushtaq Ahmad also voiced similar concerns.

“Banks and financial institutions are totally autonomous. The bank has been functioning successfully for 80 years now," said Mushtaq.

“If your business model is already successful why would you change it to PSU when other PSUs have failed in the state?” he asked.

On the matter of accountability, he said the bank is “otherwise also audited by Reserve Bank of India.”

“Where are the loopholes? I don’t think there is any scope to go for it,” he said.

J&K Bank was the sole banker to the state government till 2011. It used to work like RBI works for all other states and the Centre. The bank was the lender of last resort in the state and provided overdraft facility to the state when required.

The J&K Bank has its board of members for decision-making and consists of a state government nominee, an RBI nominee and five independent directors. The members have, however, alleged that they were not consulted before taking the decision on transforming the bank to PSU.

One of the top officials of the bank said that they are yet to receive a formal order about the PSU.

Last week, PDP organised a protest rally demanding the revocation of the order.

“Turning J&K Bank into a PSU is an assault on the economy of Jammu and Kashmir. We want to tell governor Sahab to revoke it,” said Naeem Akhtar former PDP minister. “We won’t relent until the order is revoked,” he added.

The BJP, however, condemned the protests against the decision to put J&K Bank in public sector. The party said that there is an urgent need for transparency in the operation of the bank which has been “under a cloud for rising NPAs and back door appointments.”

"The motivated propaganda against SAC decision to convert J&K Bank into PSU is highly condemnable. There is a deliberate attempt by the vested interests in Kashmir to oppose the decision," J&K BJP spokesperson Brigadier Anil Gupta said.

Governor Satya Pal Malik has said that only people with “personal or political interests” in J&K Bank are opposing the move to turn the bank into a Public Sector Undertaking (PSU) and the opposition is “without merit”.

“Those who have benefited the most from the bank are opposing this move,” he told The Indian Express.

The employees of the bank have held a number of protests and are scheduled to hold a ‘mega’ protest rally on Sunday.

“The entire staff will join the protest at our corporate headquarters in Srinagar,” said Mehraj-ud-Din, a top bank official. “Let them allow us to work freely. If they will not rollback the decision we will go for an indefinite strike.”

The Governor’s administration has clarified that the government had "no intention of interfering in the day-to-day affairs of the bank and its functional autonomy".

“Since the state government holds 60% of majority shares in J&K Bank, for all practical purposes, it is a PSU. Therefore, all transparency and accountability features that arise from this have to apply to the bank,” a government spokesperson said.