This was stated by the chairman & chief executive officer, J&M Bank, Mushtaq Ahmad in an exclusive interview to Kashmir Magazine.
Asset quality of the banking system has deteriorated significantly and non-performing assets (NPA) of even country’s largest banks have gone up considerably. Under this scenario, J&K Bank’s asset quality is praiseworthy. The NPA level of the bank is one of the lowest in the industry. the bank has a robust mechanism for NPA management in place and enables it to track down early detection of signs of distress in the loan accounts. Besides, the balance sheet of the bank is most transparent and clean, which is vetted by a series of audits conducted through a robust audit process including Statutory Audit through auditors appointed by CAG and Annual Financial Inspection by RBI.
Excerpts of the interview:
How do you view J&K Bank in present scenario?
A. Let me begin with a statement that J&K Bank is in safe and stable hands. We have earned prestige and honour at forums of national and international excellence. I am proud in saying that J&K Bank is a bank with comfortable capitalization levels marked by high capital adequacy ratio (CAR), strong low-cost deposit base, strong liquidity profile, stable financial performance and comfortable asset quality buffered by high provision coverage. We are embarking on our vision to catalyse economic transformation and capitalize on growth. Our vision is to engender and catalyse economic transformation of Jammu and Kashmir and capitalize from the growth induced financial prosperity thus engineered. We aspire to make Jammu and Kashmir most prosperous state in the country, by helping create a new financial architecture for the J&K economy, at the center of which will be the J&K Bank.
The model of our operation is unique. Even as we are a regional bank, we provide services of international standard to the people of J&K and at the same time we are functioning as a super-specialist bank in the rest of the country. The two together form a key for us to becoming the most profitable bank in the country. Our Ratings from Fitch India, a Fitch Ratings affiliate, re-affirming our Long-Term Issuer Ratings at ‘IND AA’ with Stable Outlooks vouches for our strength and operational capability. The company has rated the bank’s Subordinated Long-Term Debt at ‘IND AA’. CRISIL, India’s leading ratings agency, rates J&K Bank debt instruments at A1+’. The ratings on deposit programmes of the bank stand at FAA/ Stable/CRISIL A 1+’. CARE Ratings has reaffirmed the bank’s Lower Tier II Bonds as CARE A A. On the basis of our business outlook, financial strength, valuation, market cap and trading liquidity, Credit Suisse Group, a leading global financial services company, recently cherry-picked J&K Bank among top five organizations in Asia as an interesting investment opportunity.
What steps are you taking to arrest swelling of NPAs?
A. If you look at the over all banking scenario in the country then you will find whole banking industry is under tremendous stress. Bad loans are rising as growth has fallen below potential and companies are reeling under obstacles to project clearances. Even our regulator Reserve Bank of India has vetted this fact in one of its reports. Technically speaking, the asset quality of the banking system has deteriorated significantly and non-performing assets of even country’s largest banks have gone up considerably. Now coming to our position in this scenario: Let me clear it that our NPA level is one of the lowest in the industry. We have a robust mechanism for NPA management enabling us to track down early detection of signs of distress in our loan accounts. We have foolproof measures in place which we implement to preserve the economic value of our assets if need arises. I am proud that we have largely contained it.
What is the strength of your balance sheet?
A. Our balance sheet is absolutely transparent and clean. Don’t expect any concealing activity when you are subjected to multiple audit mechanisms. We are subjected to a robust audit process including Statutory Audit through auditors appointed by CAG and Annual Financial Inspection by RBI. Let me also remove confusion visà- vis classification of non-performing assets. An account is classified as NPA when borrowers default in repayments for three continuous occasions. Stressed account is not at all an NPA. Let’s also understand that loan accounts turning NPAs or coming under stress is a part of normal banking operational cycle. An account turning NPA doesn’t mean bank’s money is gone. Of course, it takes time and efforts which the bank has to invest in recovering these non-performing accounts in accordance with the factors responsible for turning it bad.
I also share with you that for last many quarters, stress in assets has been rampant across the banking industry. In March, 2014, we had gross NPL’s around 783 Cr while as the Net NPL’s were 102 Cr. But there is a marked difference between the stressed assets and Non Performing Loans. Normally, decision to declare an asset as non-performing has to be taken in accordance with the prescribed guidelines of the regulator, borrowers’ repayment history and market credibility. As a responsible corporate, we have been following all the prudential guidelines as stipulated by RBI for declaring sticky loans as NPA’s or restructuring advances.
What about restructuring of loans?
A. To keep an asset alive and working to the benefit of the bank, we have a tool of restructuring the assets. It’s a normal thing in the banking system to restructure loans so that they don’t fail to generate business for the borrower and income to the bank. It’s envisaged in the banking rules and is done in accordance with the rules and regulations prescribed by the RBI. As far as our restructured asset portfolio graph is concerned, it’s witnessing a downward trend.
Currently it hovers around Rs 1500 Cr which is quite normal as per industry standards. Though at one point in time it had even reached Rs2900 Cr. I again assure you that while declaring any advance as stressed, restructured or NPA we follow laid down processes and procedures which are quite robust and in accord with prescribed regulations and industry best practices. Moreover, I am proud of the trust of our stakeholders which is the most valued asset for the bank.