''Bank will regain and rather surpass its past glory in terms of Business numbers. I am confident that Bank will not have to face any untoward environment in years to come''
J&K Bank Chairman and CEO, Parvez Ahmed, spoke to a group of journalists about turnaround of the Bank from a loss making entity to its profitable ways in less than two years. While responding to a volleys of questions from the journalist group, Parvez Ahmed talked about the resolution of non performing assets (NPAs) and the road ahead for the Bank. Excerpts
Q: The past year was very tough for the entire Banking Industry? What were the challenges faced by JK Bank and how generic were they to the overall challenges of the industry?
Ans: The past year was indeed a difficult year for all Banks across country and we cannot be an exception. Actually when economy was steady, risk appetite was quite high across the banking industry, guidance from the infrastructure sector was also bullish and lot of money was pumped by the Banks. But as slowdown approached Companies which were overleveraged started to feel the crunch. The situation became complex due to Cancellation of telecom / mining licenses, gas supply issues from KG basin etc badly impacting power & telecom sector. All these catalyzed the downward trend for all banks who undertook robust corporate lending.
For us, things have been more challenging. Apart from the country-wide trend, we were also the sufferers of 2014 flash floods which massively affected every business activity in the valley. Despite strong re-structuring measures and hand-holding initiatives by the State Government, Regulators and Banks; any signs of fragile recovery were further muted by a spell of 2016 civil unrest. These are issues specific to us in the state and consequently to our Bank. Nevertheless, JK Bank has shown resilience during these overall turbulent times and managed to pull itself out of the red.
Q: Bank has recently announced profit and signs of turn around? What is your take on this and future road map for the Bank’s performance?
Ans: The Bank has achieved net profit of Rs 202 crore during financial year 2018 and Rs 52 Cr in the First quarter of FY 2018-19. We have been pursuing consolidation and clean up which is still underway. We have reoriented our strategy to revive the economic growth in the J&K state where our Trade and Personal Finance segment is already doing very well. Now we are increasing the lending in high potential sectors particularly housing, MSME, Tourism, handicrafts, service industry and Agriculture etc. Simultaneously we are fostering entrepreneurship opportunities in the state. Creating strong businesses is the sole ray of financial prosperity for J&K. Bank is soon establishing Start-Up Verticals to offer every possible support and guidance to any enterprising individual of our state who has the desire to start his/her own venture.
Secondly, as an institution, we are constantly re-inventing ourselves to align with the best practices in the Banking Industry. Technology is posing a great opportunity as well as challenge to adopt at a very rapid pace. With this objective, we began our transformation journey bringing in best consultation and revamped our organisational structure across full spectrum. We are determined to offer a world class customer experience to our clients, offer customised services to our institutional clients and most importantly offer a seamless digital transaction experience to the people of our state. Our endeavour through this transformation journey is to be future ready as a modern, efficient, customer focussed, digitally driven profitable Institution. All these initiatives coupled with our business expansion strategy will significantly reflect in our performance in coming times.
Q: JK Bank is a brand recognized across the state. What steps are being taken to serve people better?
Ans: First of all, we are very proud of our legacy as Bank of our people. We greatly value the sentiments with which people of our state are attached to our Brand and this is our primary motivation in performing best, serving to empower every individual of our state. Every single day, me and my team are working and thinking, “How can we serve our people better?” So this question is indeed etched in our minds all the time.
As part of financial inclusiveness, Bank is focussing on robust branch expansion by opening 200 Business Units in the current year in hitherto underbanked areas of the state in addition to rolling out a pilot project in September to link all 111 villages of Leh by establishing a network of 34 Ultra Small Branches. We want to offer seamless banking experience in Leh no matter how harsh the climate or topography. The model will be replicated across the state to cover the entire geography. This will not only increase the credit penetration but will also insulate the bank from the threat of future competition from payment banks and NBFCs.
Again I would like to mention, from the first day of my tenure, I have strongly indicated Bank’s complete support to fostering entrepreneurship opportunities in the state. We consider JK Bank as a very important stakeholder in the financial prosperity of J&K. It is our strong belief that state’s prosperity lies in enterprising youths willing to take up entrepreneurial ventures and leveraging the strong sectors that our state has to offer. This is the perfect time. All entities- Central Government, State Government, Financial Institutions all are aligned to actively support and strengthen Start-Ups across the country. We have in fact requested to the Hon’ble Governor to create a Start-Up Fund on the lines of North-East Venture Fund for J&K.
Q: How is the Bank dealing with the NPA crisis?
Ans: First of all let me inform that NPA in J&K Credit Portfolio is only 3.5% as compared to 16.8% in Rest of India Portfolio. So in the J&K state NPA is not an issue. The people too are forthcoming in settlements of their dues. In the rest of India portfolio we took a series of measures to tackle this problem. We set up Impaired Assets Portfolio Management Vertical and a highly specialized team has been consistently working to reduce NPAs through real-time monitoring, enforcement of SARFAESI and other legal measures. Also, we have a dedicated Analytics tool in place for early detection of problem accounts and flag early signs of delinquencies. Our concerted efforts with regard to NPA have yielded rich dividends with recoveries / upgradation and settlements of over Rs. 1600 Crores in FY 2017 and over Rs. 3000 crore in FY 2018 During the current FY, we aim to further reduce gross NPA level by ₹2300 crores mainly in the rest of India Portfolio through the NCLT route. Though it will entail substantial haircut but shall not only bring down the gross/net NPA ratios but will also enable us to start the next Financial year on a clean slate.
Q: Some signs of concern have been shown by State administration on growing cost to income ratio of Bank? How is bank dealing with this issue?
Ans: At 58% as on Mar 18, our cost to income ratio though on higher side and there is room for bringing it down; but it is comparable with other players like PSU banks and old generation private sector banks are in the range of 50 to 60%. We value the guidance and support of state government who are our promoters and shall follow the advice religiously.
Let me update you that our operational expenditure has increased in recent past due to investments in creation of digital infrastructure, settlements / write-off in NPAs and salary revision. Decrease in income due to rising NPAs on account of interest reversals also contributed to a higher ratio. As far as investment in digital infrastructure is a concerned it is a significant one and it will fetch us very good returns in the times to come and rather cut on various costs of operation by migration of manual transactions. NPA settlement costs will soon be offset by our strong recovery initiatives. Also, we are relooking income augmentation by restructuring rest of India business & selectively expanding in profitable territories and merging not so viable Units. During the current year challenges on NPA Settlement/provisioning and reversals of interest booked on JK restructured portfolio as per RBI directions will continue to mount pressure on the Operational Expenditure but going forward it will stabilize. I am quite optimistic that during FY 19-20 we will be comfortable with a cost to income ratio of around 50%.
Q: People talk about some concerns about the transparency in recruitment process. What is your take on that?
Ans: The recruitment in the bank for officer and clerical cadre is done through a written test conducted by Institute of Banking Personnel Selection (IBPS) which is the nodal recruitment agency in all the PSU Banks in the country. It is an agency of repute with immaculate track record whose governing board comprises of nominees from government organizations such as the Reserve Bank of India (RBI), Ministry of Finance- Government of India, Indian Institute of Technology(IIT) Mumbai, Indian Institute of Banking and Finance(IIBF), National Institute of Bank Management(NIBM), Indian Banks’ Association(IBA) and the public sector banks. In the subordinate cadre/ATM guards/Gardeners/Sweepers etc. Bank is either recruiting directly on compassionate basis or on outsourcing arrangement. We are working on a mechanism wherein the process shall be made more transparent with enhanced checks and balances as suggested by the state government.
Q: Are you optimistic about the coming times for the entire banking industry?
Ans: Certainly! I strongly believe that the worst is over for the Banking industry as a whole. In the local perspective we are growing our credit at a much faster rate than the industry average. We achieved 20 % credit growth in J&K previous fiscal and in the current year we are targeting a credit growth of 25%. We have solicited some measures from the state government in matters of expeditious digitization of land records in the state for streamlining credit flow in housing and infrastructure sector along with administrative facilitation in SARFAESI implementation and execution to improve the credit culture in the state.
Q: Bank regularly undertakes various CSR initiatives. What are the key areas that Bank is most sensitive about towards society?
Ans: In the heart of all our initiatives lies just one objective and that is to create social infrastructure especially in Health, Education & tourism sectors. We strongly support initiatives of Education as a means of socio-economic empowerment particularly for under privileged children. Being a responsible corporate Citizen, we also want to make every possible attempt to work towards Environment and maintain pristine natural beauty of our state. We currently maintain 13 Parks and walkways under our “Environmental Excellence Programme.” We are also keen to support initiatives to preserve the rich cultural heritage of our state.
I am strong believer in enhanced Industry Academia partnership for cross pollination of resources & ideas. That is why we have been reaching out to all the academic institutions and have introduced academic excellence medals for male and female toppers in all universities. Professor Chairs are proposed to be established in different Universities for Rural Innovation and Start Ups. To support the start up ecosystem we have entered into MOUs with all major incubators like the SMVDU TBIC, CUJ BIC, KU TBIC in the state to finance the startups being incubated.
Q: Bank is one of the largest employers of bright youths in the state. What message do you have for youngsters who aspire to join JK Bank?
Ans. The best people are working with us. We boast of the best employee workforce any organization aspires to have. Common attribute of JK Bank Falcons as we call our people, is passion to serve people! Your academic merit, hard work, soft skills are certainly tested during our recruitment process, but eventually you excel here if you have the passion to empower your people through dedicated service to them. Seek your passion and if your passion aligns with our guiding principle, you will find the best place to work for is JK Bank.
Let me acknowledge that it was with the concerted and relentless efforts of all the staff members that the bank came out of the red in less than two years.
Q: What is your motivation and vision for the Bank?
Ans: I have served in JK Bank for 20 years until I became the Chairman & CEO of this premier Institution. JK Bank is my extended family. My vision is to take this Bank to soaring heights and make it a real catalyst for growth and empowerment of our state through transparency, resilience and transformation. I strive to make JK Bank a strategically growing, technologically modern and operationally agile institution.
Q. Where do you see J&K Bank in the next five years?
Ans: Bank will regain and rather surpass its past glory in terms of Business numbers. I am confident that Bank will not have to face any untoward environment in years to come.
Q. Is Bank intending to go overseas?
Ans: Yes, we are working towards taking our operations overseas. Work is in inception phases. As soon as we achieve our first milestone objective, we will share more with you all on this front.
Q: What is your message to young professionals and future business leaders who aspire to reach the top like you?
Ans: Strive for excellence and settle for nothing less than that. Work hard with honest spirit, create a collaborative spirit and you will see how everything aligns to support your best intentions
Q: Any crystal gazing on the numbers for the future?
Ans: With the kind of strategy we have in place which includes focus on Retail and SME Segments; Selective lending in Corporate restricted to AAA/AA rated Companies; Focus on Housing, building Agriculture ecosystem, Govt spending, Gold Loans, HNI Business, Rural expansion in J&K state I have a firm belief that the Business should double by FY 2021-22 and touch 2.45 lakh crores. The resultant Net Profit will be in the range of 2000 Cr with Cost to Income ratio to improve from 57% to below 50%..