J & K Seeks Loan Waiver

The Jammu and Kashmir finance ministry is negotiating with leading financial institutions and banks to waive the entire loan portfolio of local entrepreneurs in an effort to rehabilitate business in the state.

IDBI is coordinating the operation of collecting banks' and financial institutions' problem exposures in J&K and ICICI is likely to syndicate a loan for the state.

IDBI chairman G P Gupta said, "We are looking at loans on a case basis." In cases where the unit can be rehabilitated, banks and financial institutions will look at ways to rehabilitate it. "We will have to find buyers in case there are realisable assets," Gupta said.

IDBI sources said since a large number of these loans were guaranteed by the state government, the entire loan portfolio of the state cannot be waived.

IDBI's exposure in J&K was over Rs 350 crore at the end of March 1998 while ICICI's exposure was nearly Rs 20 crore. "ICICI Securities is expected to raise resources for the state through private placement while ICICI is likely to place some of its funds with the state," sources said. "The debt relief package is aimed at reviving sentiment of those planning to invest in the state," they said. "In fact, an inter-ministerial committee has been set up to chalk out the package." The state government has sought waiver of loans above Rs 50,000 per entrepreneur. "The state government is working on the pros and cons of the matter and has also sought assistance from the RBI ," sources said. Bank credit to the state was Rs 465 crore as of December 1997 while development financial institutions sanctioned and disbursed loans worth Rs 700.7 crore and Rs 617.6 crore, respectively, as of March 1997.

The state in 1996 received a waiver of loans for local borrowers who had originally borrowed below Rs 50,000. The state government had taken the Rs 290 crore liability on its books.