Syed Junaid Hashmi
JAMMU, Oct 25: Profit of Jammu and Kashmir Bank declined from Rs. 1,182.47 crore during 2013-14 to Rs. 202.72 crore in 2017-18 mainly due to increase in Gross Non-Performing Assets (NPAs) of the Bank from Rs. 643.77 crore, as on March 2013 to Rs. 6,006.70 crore as on March 2018.
A performance audit of the Bank for the period 2013-14 to 2017-18 brought out these deficiencies. And this happened when bank was being led by Mushtaq Ahmed (October 2010 to October 2016) who was believed to be close to Abdul Rahim Rather, the then finance Minister of NC-Congress coalition government and later, Parvez Ahmed (Oct 2016 to June 2019) whose proximity with PDP leadership and Union Ministers of BJP-led NDA government was talk of the town. And it happened when ace economist Dr. Haseeb Drabu was finance minister of PDP-BJP government in Jammu and Kashmir.
Percentage of Non-Performing Assets (NPAs) to gross advances also increased from 1.62 percent at the end of March 2013 to 9.96 percent at the end of March 2018. The Bank also suffered a loss of Rs.1,632.29 crore during 2016-17. This is tip of the iceberg since audit usually does test check and points towards glaring deficiencies in the functioning of the bank. If an in-depth audit of the bank functioning and assets management is done, more skeletons are likely to tumble out.
Although there had been 24.58 percent growth in deposits during 2013-14 to 2017-18, annual growth of deposits of Bank during last four years ending March 2017 was far below overall National average of Scheduled Commercial Banks. Bank had recorded increase of 51.30 percent in advances during 2013-14 to 2017-18, annual growth fluctuated between (-) 1.78 percent and 18.28 percent.
Percentage of unsecured advances to total net advances had increased from 20.16 percent at the end of March 2014 to 27.90 percent at the end of March 2018. Bank’s concentration risk for industry-wise exposure was on higher side when compared to average of overall banking industry.
Audit found out that sanction/release of credit facilities, without safeguarding bank’s interest through adequate security cover, proper credit appraisal, adherence to pre or post-disbursement conditions of the sanctions, regular monitoring, etc. not only led to NPAs but also loss as well as non-recovery of Rs. 197.98 crore, doubtful recovery of Rs. 1,599.14 crore and excess payment of Rs. 14.10 crore in test-checked cases.
Deficiencies were noticed in Information Technology systems of the Bank due to which it could not ensure technology-based solutions for some of its operations. Sanctioning of one-time settlement in deviation of Bank’s recovery policy resulted in sacrificing of principal amount of Rs. 17.97 crore in test-checked cases. The Bank sold ten NPAs to Asset Reconstruction Companies (ARCs) during the period 2014-2018 by sacrificing principal amount of Rs. 671.10 crore and unapplied interest of Rs. 504 crore. Sale of financial asset to ARC below the reserve price resulted in loss of Rs. 21.89 crore.
Imprudent decision-making, non-invoking of guarantee and non-safeguarding of Bank’s interest led to doubtful recovery/ loss of Rs. 180.43 crore in test-checked Non-Performing Investments. Irregularities in recruitment of relationship executives and banking associates were noticed. Bank had spent 53.09 percent to 83.82 percent of Corporate Social Responsibility (CSR) budget during 2016-17 and 2017-18 on a single activity/project and had also incurred 49.33 percent to 95.27 percent under a single segment during 2015-16 to 2017-18, which was in violation of CSR policy.
Further, in contravention to Bank’s corporate social responsibility (CSR) policy and Companies Act 2013, an irregular expenditure of Rs. 46.96 crore was incurred out of CSR fund. Bank had not complied with the SEBI Regulations and some of the provisions of Companies Act, 2013 relating to corporate governance. Bank’s credit control system and financial reporting system failed to identify Non-Performing Assets (NPAs) in time.
Jammu & Kashmir Bank Limited (Bank) was incorporated with the objective to establish and carry on business of a banking company; borrow or raise money; to lend money by making loans and advances; to buy, sell, collect and deal in bills of exchange, hundies, promissory notes, drafts, bills of lading, debentures and other instruments; to deal in stocks, shares, debentures, securities and investment of all kinds; to buy and sell foreign exchange including foreign notes; and to act as agents for Government or local authorities.
