J&K Bank declared PSU: Traders, politicians call on Governor for rollback

Srinagar | Wahid Bhat

Jammu & Kashmir, which has been facing a political instability following the sudden dissolution of the assembly is now headed towards another standoff over the decision by Governor Satyapal Malik to turn the J&K Bank Ltd into a public-sector bank. Major political parties and traders in the state have criticised the move, which brings the bank under the purview of the Right to Information (RTI) Act curtailing its autonomy.

Uniqueness of J&K Bank

Established in 1938, the J&K Bank is the only bank in India in which a state government holds a majority stake (59.3 per cent). In all other PSU banks, the majority stake is held by the Centre. As per the Banking Companies (Acquisition & Transfer of Undertakings) Act, the central government holding in PSU banks must not ever be below 51 per cent.

While the state government holds a 59.3 per cent stake in the J&K Bank, it is not considered a PSU. The bank is licensed as an “old private-sector bank” under Section 22 of the Banking Regulation Act, 1949. It comes under the regulatory purview and subversion of the Reserve Bank of India (RBI). In April 2011, the then Omar Abdullah government gave RBI the mandate to carry out general banking business of the state and be the sole agent for the investment of state funds.

The uniqueness of J&K Bank’s status derives from Article 370 of the Constitution, which gives special autonomous status to the state of Jammu & Kashmir. J&K Bank is the largest employer among all state-promoted entities with a workforce of 9,190 employees in 2015-16. Among the 10 PSUs out of 30 that earned a profit, J&K Bank accounted for Rs 416 crore (50% of the total profits of all PSUs), according to the CAG report of 2016-17. Till 2011, J&K Bank was the sole banker to the state government. In fact, akin to RBI for all other states and the Centre, J&K Bank was the lender of last resort in the state. It provided overdraft facility to the state when required.

A former chairman of J&K Bank had once said that the bank performed the role of a commercial bank, a developmental financial institution, financial services provider, as well as a central bank. It lost some of this status in April 2011, when Omar Abdullah was Chief Minister; the state government gave RBI the mandate to carry out general banking business of the state and be the sole agent for the investment of state funds. However, it is still the only private-sector bank designated as RBI’s agent for carrying out banking business for the state government. It is also the state’s collection agent for direct taxes, utility payments, and now GST

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Political reaction

All regional political parties have criticised the move as an assault on the bank’s autonomy. Chairman PDF Hakeem Yaseen has demanded immediate revocation of SAC decision about reducing J&K Bank into a PSU. Hakeem Yaseen speaking to Ground Report said, “We fails to understand what was the urgency to fiddle with the autonomous character of the J&K Bank when its overall performance has been quite satisfactory.” He said that the SAC decision would open possibilities of political interference in the functioning of J&K Bank which has been rendering a significant role in the economic and social development of the State. He said though bringing the Bank under RTI will help to bring more transparency in its working, its autonomous character needed to be preserved at all costs”.

Hakeem Yaseen said that the way Governor administration has decided to reduce the autonomy of the J&K Bank, it has created apprehensions in the minds of general masses that conspiracies are being hatched to erode financial autonomy of the state. “Economic experts and business community to have expressed their apprehensions against evil designs of the SAC on. J&K Bank,” Yaseen added.

Sajad Lone of People’s Conference said his party’s economic philosophy is decentralisation and total liberalisation. “We believe in smaller government, not more government control. The best thing the government of the day can do is to get out of the way. Any remedies (regarding J&K Bank) should have been institution-specific, rather than invading it with overarching government control. The track record of J&K government PSUs is extremely bad,” he said.

Former finance minister and ex-chairman of J&K Bank Haseeb Drabu said the decision was “thoughtless and regressive” and it will have a “very negative impact” on the prime institution of the state and its functioning
Why formal orders not issued?

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Jammu & Kashmir RTI Movement has expressed its dissatisfaction over the government’s silence on its decision to convert JK Bank into a Public Sector Undertaking (PSU), saying that till date no formal orders have been issued in this regard which adds to the confusion among people. “People are not able to understand what kind of PSU will J&K Bank be? Will it be like a state PSU or the one like under Government of India?” Chairman RTI Movement Dr Raja Muzaffar Bhat said

Traders reaction

Kashmir Chamber of Commerce and Industry has opposed the decision of the State Administrative Council (SAC) to bring the J&K Bank Ltd under the purview of RTI, CVC and the legislature. Explaining the reasons, the body said that the Bank cannot be treated as any other Public Sector Undertaking as it is a public listed company and is also governed under banking laws. “The decision is being seen as unwarranted interference in the functioning of the Bank. It is because of the autonomy, the bank enjoyed since it’s inception, that it has attained a present level and become an important component in the existing economic structure of the state,” it said. Reportedly more than 50,000 shareholders have stakes in the Bank along with the government.

Economic Alliance Chairman, Haji Muhammad Yasin Khan, speaking to Ground Report said that this financial institution should not be politicized. Khan, who heads the Kashmir Traders and Manufacturers Federation said for quite some time efforts are being made to “politicize and demonize” J&K Bank in one way or the other only to meet nefarious designs of some vested interests.

“Some forces are hell bent to defame the bank as a part of the larger conspiracy to deprive the people of Jammu and Kashmir of their assets by making drastic changes that may look good at the face of it but will have far-reaching consequences,” Khan said. Industrialists Association Khunmoh while saying that the recent decision of State Administrative Council was an attempt to “rob” the state of its financial autonomy has demanded a complete rollback of the SAC decision