Srinagar, Oct 9: With an eye on the untapped domestic market, the Jammu and Kashmir Bank is planning massive expansion in the state while eyeing high profile London and Dubai markets.
Revealing massive expansion plans at a press interaction here, first by him after he got the second-term, chairman and CEO JK Bank, Mushtaq Ahmad said the bank was looking ahead to expand further its branch network at important business centres in the state and in India, before envisaging a foray into foreign markets. However, he hastened to add that the bank was also interested in opening its branches in Dubai and London.
Notably, Reserve Bank of India on September 17, 2013 granted approval for extension in his term as Chairman & CEO of J & K Bank by a period of three years effective from October 6, 2013.
Pertinently, the Bank celebrated its platinum jubilee on October 1. Union Finance Minister, P. Chidambaram joined the Bank's celebrations along with J&K Chief Minister, Omar Abdullah, Deputy Chief Minister, Tara Chand, Finance Minister and Abdul Rahim Rather.
Union Finance Minister P Chidambaram on the occasion had suggested J&K Bank to expand its branch network not only outside the state but also outside the country, saying it would boost the confidence of traders and businessmen from the state. Mushtaq Ahmad while commenting on the suggestions of the union finance minister said, "We should be going to London and Dubai first. It will take two years to start these branches. On the domestic front, we are planning to add 20 branches in Kerala, Karnataka, Mumbai and Gujarat during this year."
"The bank will soon apply to the Reserve Bank of India (RBI) to secure a licence for the same," he said.
The CEO JK Bank said the bank was not charging higher interest from its customers in the state. "Interest rates are not linked to geography. They are linked to the quality of the account. J&K is our core constituency. We value our customers and therefore there is no question of charging more in the state," he said.
Reinforcing his argument with figures, he added: "Our interest yield from outside the state is 12.01 per cent, while in the state it is 12.39. The difference of 38 basis points is only because our outside customers include public sector undertakings and big corporations which are offered loans by the banks at the most competitive rates. If you remove them from the list of our outside state borrowers, our interest yield outside the state goes up to near 13 per cent, which is higher than what we get in the state."
SLIP IN BUSINESS
In reply to a question, Mushtaq Ahmad said it was due to economic slowdown J&K Bank slipped from its Rs 1,00,000 crore business milestone it had achieved on Dec 31, 2013, in the Q1 this year. "Some of the high cost deposits that we had mobilized earlier became difficult for the bank to sustain. So it was better to get rid of those deposits than to continue them," he reasoned, adding that J&K Bank had strong fundamentals.
Mushtaq Ahmad said that J&K Bank was fortunate enough among the banks to recover most of its loan amount from the Kingfisher airlines. "When big banks like State Bank of India are still struggling to recover their loan from the grounded Kingfisher Airlines, J&K Bank has made a smart move and got back most of its loan. The bank took advantage of the United Breweries-Diageo deal and managed to recover Rs 90 crore out of the Rs 100-crore loan exposure to the airline," he said.
After declaring the Kingfisher account as a non-performing asset, when talks on the UB-Diageo deal were on, the bank triggered sale for pledged UB shares and sold at Rs 1,880 a share and recovered Rs 90 crore, he said.
Among its new plans, the chairman said the bank had set a target of Rs.1.25 lakh crore business by the end of this fiscal.
On the financial strength of the bank, he said the deposits of the bank had increased from Rs 39,688 crore as on 30th September 2010 to Rs 64,010 crore as on 31st March 2013 (Increase of 61%). "During the same period loans and advances have increased by Rs 16,257 crore from Rs 23,876 crore to Rs 40,133 crore (Increase of 68%)."
"The net profit of the bank jumped from Rs. 512.38 crore for the FY 2009-10, to all time high net profit of Rs 1,055 crore for the FY 2012-13," he said.
Notably, against the dividend of 220% (Rs. 22/Share) paid for the FY 2009-10, the Bank paid a record dividend of 500 per cent (Rs 50/share) to its shareholders for the FY 2012-13. In the last three years, the Bank has opened 221 new business units and installed 400 ATMs thereby taking the number to 750 and 726 respectively.
The chairman outlined the bank's asset quality, which is one of the best in the industry. The bank's gross non-performing asset is under 2% and maintains a provision coverage ration above 90%. "Even as slippages are inevitable, the bank on the whole would be maintaining provision coverage ratio above 90% and gross NPA to remain below 2% under all circumstances," he said.
Commenting on the restructured loan book, the chairman said, "As of now, restructured book is around Rs.1500 crores and at the same time, there could be some upgradations. The bank would be ensuring to see this restructured book remains within Rs.1500 crore to Rs.1700 crore."
JK BANK HAILED
The chairman said the union finance minister praised the bank for maintaining highest net interest of 4% when other banks were struggling to better their position on this front.
"Taking the prevailing scenario into account, the margins could be under pressure, but we are striving to be in a position to sustain the existing level. Going forward yes, we are also considering to raise our base rate, but so far we have not taken any decision".
While discussing the bank's comfortable position on capital front, he said the bank is currently positioned at a capital adequacy ratio of above 13%.
The bank has sufficient capital cushion for growth for two to three years. "Since the state government is major shareholder of the bank with 53% shareholding, the bank has already sounded the government about future capital infusion, if need arises. Besides, the bank shall be counting on other shareholders for just infusing more capital. But at the moment, the bank has not taken any call," said the Chairman.