J&K approaches RBI to seek rehab package for “big borrowers”

With the business community in the union territory (UT) suffering huge losses, Jammu and Kashmir Government has approached the Reserve Bank of India (RBI) to seek rehabilitation package for “big borrowers.”

The move comes after the beleaguered business community urged the government to come to its rescue in the wake of massive losses incurred post-abrogation of Article 370 in August last year, which led to clampdown, uncertainty and communication blockade in J&K.

Last month, as many as 21 business bodies of the Valley, including the Kashmir Chamber of Commerce and Industry (KCCI), in full-page newspaper advertisements had urged banks not to “harass” them to recover loan repayments. They said the business community in Kashmir is “devastated and exhausted” and its “survival is under threat.”

The business organizations had urged the banks to stop calling them “defaulters” as they don’t deserve to be named and shamed for owing banks the money they invested with them.

A senior official in the Finance Department said that J&K chief secretary has directed the concerned agencies to take up the issue of a rehabilitation package under ‘master directions on relief measures by the banks in areas affected by calamities.’

A note of the minutes of the first UT-level Bankers’ Meeting reads: “Chief Secretary, J&K Government pointed out that during the Special Meeting of erstwhile J&K SLBC held on 10th September 2019 at Srinagar, the house had passed two resolutions for consideration by Reserve Bank of India, but (the) RBI has accepted only half of those recommendations.

“Considering the difficulties faced by the business community in UT of J&K, the following two resolutions were adopted by the house: (i) Reserve Bank of India be requested to consider large borrowers also as eligible for the Rehabilitation Package under Master Directions on Relief Measures by banks in the areas affected by natural calamity; (ii) Reserve Bank of India be requested to consider a modification in the eligibility criterion for rehabilitation benefits” to the extent that “all eligible loans under Master Directions which are not overdue as on 5th August 2019 be reckoned for restructuring.”

“All eligible loans under Master Directions, which are not overdue as on August 5, 2019, maybe reckoned for restructuring while old restructured accounts, which are standard and not overdue (restructured only under Master Direction) may be considered only if they are affected by current disturbances,” read communication by the RBI to J&K Bank, Convener of Union Territory Level Bankers Committee (UTLBC).

While the period for completing the restructuring exercise has been extended up to June 30, 2020, “big borrowers” are not eligible for the rehabilitation benefit. In recent years J&K Bank has faced massive losses after some big companies failed to pay back the loans.

The gross NPAs across J&K (including Ladakh) were at Rs 2673.94 crore in December 2018, making only 4.91% of the Rs 54495.75 crore. These reached Rs 4147.55 crore (by September 2019), which means seven per cent of Rs 59273.41 crore advanced in the Union Territory (excluding Ladakh) is impaired.