The J&K Government ( as a customer and not as a shareholder) snapped its business ties with JK Bank and shifted its business operations to RBI .The bank under the new arrangement effective from April1, 2011 was confronted with at least a challenge. The OD facility availed by the State Government from JK Bank to the tune of Rs 1700-2300 cr earned the bank a safe revenue of rs 250-300 cr annually. The bank enjoyed confidence of an age old and credit worthy customer until March 2011. The funds were employed in safe hands with Zero risk but assured returns.  As such it becomes imperative to assess the performance of the bank in new scenario.
In the ultimate analysis an organization that adds value is a winner and the effective would gain and lead the rest. The more effectively scarce resources are utilized the greater the economic and social objectives are achieved. “Every single transaction has to add value for the bank,” says an economist in the context of a bank organization. The central point round which all the operations move in a business is sales turnover. Sales is the life blood of a bank business as well. It is evident that value added inter alia depends upon twin strategy of pricing policy and volume of sales. A rational pricing policy is necessary in view of the inherent conflict between commercial and social objectives of a bank. The prices of financial products or financial services offered are determined at an optimal level of capacity utilization.
The prices now are competitive as a sequel to which margins are shrinking but customers are demanding more. Gone are the days when price fixation was cost based; market forces determine prices and target costing plays a deciding role.  The JK Bank understandably has its strategy in pricing for each product classification (credit as well as deposit) and a set of financial services offered in order to cope with the mounting pressure on value added generation.
The allocation of funds in respect of credit deployment as well as investment avenues are very crucial strategic decisions that impact yield on advances and investments respectively. Aggregate earnings are the outcome of an effective interaction between price and volume. It is quite convincing to link price management to growth performance and business development of the bank in several critical functions to enhance and improve upon efficiency in intermediation and cost monitoring.
The analysis based on annual corporate report of JK Bank (2011-12 vis a vis 2010-11) reveals that the aggregate earnings registered a fillip to the tune of Rs 1091.81 cr during the fiscal 2011-12  over past year to meet the level of rs5169.70 cr .The value addition went up by an amount of Rs 360.31 cr to touch the level of Rs 1820.51 cr and has created a win-win situation for all the stakeholders. Employees of the bank have been in a position to have a share of Rs 621.41 cr from the value addition. Last year they preferred their claim for an amount of Rs 523.81 cr only. Similarly national exchequer also received an amount of Rs 84. 08 cr more by way of taxes than previous financial year. Shareholders also got an amount of Rs 162.40 cr as against Rs 128 .04 cr past fiscal. Thus the cash outflow recorded an increase to the tune of Rs 1208. 02 cr - the year under report. The bank has been able to retain an amount of Rs 612.49 cr or strengthened bottom-line by Rs 144.27cr more than previous financial year for its growth and development.
The bank as a sequel to certain strategies has been able to effect a substantial increase in turnover. The amount of change caused due to strategic decisions in pricing and volume separately, however, is difficult for an external analyst to explain. The bank professionals may ponder over it. The positive change, however, due to pricing factor in value added implies that the bank has been able to withstand the competitive pressures. While as positive change in volume of sales similarly reflects the capability of the bank to expand and improve upon its market share on its own strengths.
The bank has adopted certain strategies in effecting savings in respect of operating costs (Rs 60.42 cr) and risk provisioning (Rs41.86 cr). These savings increased net value added by an amount of Rs 102.28 cr. Meanwhile, the bank has not been able to maintain last year level in respect of income from financial services as a reduction to the tune of Rs 30.64 cr has been suffered.
The bank based on the aforesaid analysis ensured returns on funds deployed as well as facilities offered to meet not only the cost of resources but generate adequate contribution to cover transaction cost, risk cost, capital cost, social cost etc. Finally, the bank has reflected an exemplary performance, as a consequence of varied strategies, for retention from value added after meeting other stakeholder claims for its growth and survival. The strategies adopted have yielded returns and the bank is on the path of sustainable business development.

Author is Principal S P College, Srinagar and can be reached at gilkarna@rediffmail.com

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