J&K Bank: Gone?

“What’s this J&K Bank brouhaha all about? I don’t understand anything about Banking, Finance or Economics. Can I be told in simple language what the Governor has done?’, asked someone. A reply to such a query would be: Imagine a leading private school like Burn Hall, Presentation Convent, DPS or GVEI (despite all its shortcomings) has been handed over to the government so that it be run as the Govt High School-Sonwar or Govt. High School-Jawahar Nagar. What’s going to be your reaction to this? A similar reaction is expected of you for this decision of making J&K bank a PSU. Nothing more, nothing less.

The SAC (State Administrative Council) under the chairmanship of the governor, on Nov 22nd – just one day after dissolving the assembly, approved a proposal of treating J&K Bank Ltd as a public-sector undertaking. It also approved the provisions of the J&K Right to Information Act, 2009, which is not the concern. It will have to follow the guidelines of the Central Vigilance Commission. The RTI – if made to specifically enhance transparency, and not impede smooth functioning of the bank, by involving it in unnecessary legal entanglements- is a welcome measure. 

   

We must understand that although the state government holds 59.3% shares in the J&K Bank (being the only State that owns a bank), it is not considered a public-sector-bank. In public sector banks in India, it is the Central – and not the State government, that is the majority stakeholder (shares can’t go less than 51% for the Center). This special status to the J&K Bank is due to Article 370, which is the nucleus of the problem, as far as I am concerned. The government of the day is aware of other PSUs and their dismal performance in the state- JKSRTC &JKTDC for example. Their motivation is to hurt J&K special status, no matter when, how, where or at what cost. The uniqueness of J&K is the eyesore to the powers that be.

It’s to be admitted that J&K Bank hasn’t been doing well, compared to how it was a few years ago. The bad loans have risen to 6232 cr INR from 2746 cr INR in just 2 years i.e. equivalent to 6% of total advances (now jumped to 10%). Whether it could be attributed to the 2014 deluge is another issue. The point is that even the most profitable institutions go through phases- bad and good. At the max, we could improve the corporate governance, i.e. alter rules, processes, regular practices of the bank. We could attract the best minds in the industry. We could enhance the Trainings & Development as a department to further upskill the employees. However, that doesn’t seem to be the priority. It’s to simply add to the long sequence of events that rip us off our special provisions.

During 1964–65, Articles 356, 357 and 249 of the Indian Constitution were made applicable to J&K. These respectively, and importantly, allowed the Central government to dismiss an elected state government, to assume its legislative functions, and to legislate on subjects reserved exclusively for Indian states. Who was in power? The Governor? No. It was PM (& then a CM) Sadiq. In 1965, Sadiq changed various local nomenclature to reflect those used throughout India. Thus, ‘Sadar-i-Riyasat’ became ‘Governor’, while the ‘Prime Minister’ became the ‘Chief Minister’, a change that impacted personally on Sadiq. Additionally, New Delhi was empowered to appoint the Governor, not the Indian J&K Legislative Assembly, as had been the case. A further change occurred in 1967 when electors in J&K became directly involved in the Indian political system by electing six representatives to India’s Lok Sabha (People’s House; lower house): three from Kashmir, two from Jammu; one from Ladakh. Previously, the Indian J&K Legislative Assembly had nominated these representatives.

The bank was a commercial bank, a developmental financial institution, financial services provider, as well as the Central bank, as per the statement of one of its chairmen. Who sabotaged that? Who traded that away in April 2011. It was Omar Abdullah who gave the mandate to the RBI to carry out general banking business of the state and be the sole agent for the investment of the State funds. Otherwise, it was J&K Bank which used to be the sole banker to the State government. It acted as the RBI acted for all other states, i.e. the lender of last resort, providing overdraft facility as and when required. So, to begin with, the so-called ‘mainstream’ has no moral authority to even speak a word on Governor’s decision. For each term of their power, there’s been a trade-off between them and New Delhi. They have facilitated Delhi to eat the flesh and bones of our special provisions for the sake of power. They sermonize today because they are not in power. So it’s politically expedient for them to pretend as defenders of the article.

Now before the bank is asked to be accountable to the State legislature, wherein the Finance Department will be required to present the bank’s annual report before the assembly, and like in other PSBs, the JKB is asked to expand its network under the schemes like Pradhan Mantri Jan Dhan Yojna and numerous others, we should oppose the move. The bank will be mired with the burden of additional reporting and Kafkaesque bureaucracy. We must save it if we can. Legal ways should be explored if public pressure does not work. Since the Banking Regulations Act, applicable to the J&K State since 1956, says that JKB comes under the regulatory purview and the supervision of the RBI, bringing it under the State legislature will be somewhat empowering the State to have powers over banking. Apparently, this seems to be against the provisions.

makhdoomi.mehboob6@gmail.com

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