J&K Bank to increase exposure to corporate borrowers, PSUs: MD Prakash

In a Q&A, Baldev Prakash said the lender will also target Mumbai, Bengaluru, Delhi, Pune and Mohali through tie-ups, and hold campaigns for retail asset/liability products in order to improve its CASA

Jammu & Kashmir Bank (J&K Bank) plans to increase its exposure substantially to high-rated small- and mid-scale corporate borrowers and AAA/AA-rated PSUs across the country. It has deputed its personnel for better management, creation of clusters in Mohali, Lucknow and Bengaluru to drive business productivity and growth, MD & CEO Baldev Prakash told Nikunj Ohri in an interview. The bank will also target Mumbai, Bengaluru, Delhi, Pune and Mohali through tie-ups, and hold campaigns for retail asset/liability products with a focus to improve its CASA. It is looking to collaborate with Fintechs to venture into areas like co-lending, digital on-boarding of customers, credit risk automation and data analytics. Excerpts:

Has the bank been working on expanding its presence much beyond Jammu & Kashmir and building a pan-India presence? What are its plans?

J&K Bank had a decent pan-India presence earlier as well, and had consciously decided to restrain lending to large corporate accounts outside J&K due to huge slippages in such accounts in its rest-of-India operations that weakened our capital position during a particular period.

Now that our capital position has strengthened, we have a goal of scaling up our business up to Rs 4 trillion in the next five years. WIth this, one would naturally be inclined to increase the focus on Rest-of-India (RoI) operations. And our reoriented business strategy envisages around 50 per cent of the overall loan book from RoI business to not only expand our reach but also to offset the concentration risk of our core-geography, which is J&K. The bank’s business target has been set at Rs 2.22 trillion for FY23. Gross advances as on June 30, 2022 were Rs 76,807 crore.

We plan to build volumes in Rest-of-India and harvest increased margins from our core operational geography by lending to under-serviced and more-productive sectors of the economy.  

Is the bank planning to raise exposure to corporate entities or is it planning to improve its retail business?

It is not a question of either or. We shall continue to focus on low-ticket, high-volume credit dispensation in J&K and Ladakh, in addition to catering to existing and prospective corporate clientele. However in RoI, we will increase our exposure substantially to high rated corporate borrowers (small & mid segment) besides AAA/AA-rated PSUs, while increasing our retail portfolio on both the asset and the liability side to improve margins and profitability.

The steps taken include placement of a General Manager as Divisional Head (ROI Business Operations) for better management, monitoring & follow-up of business; creation of clusters in Mohali, Lucknow and Bengaluru to drive business productivity and growth, targeting select markets through tie-ups in strategic places like Mumbai, Bengaluru, Delhi, Pune and Mohali and initiating aggressive and targeted campaigns for retail asset/liability products with focus on CASA. We have also set up large credit units specifically offering personalised services to the big ticket clients through highly evolved relationship management models.

The bank is also planning tie-ups with fintech companies to improve outreach to prospective SMEs and other priority sector borrowers particularly in RoI.  

Does J&K Bank plan to invest in strengthening IT systems and join the AA system?

We are in the process of revamping our IT infrastructure and application landscape to ensure our IT assets are robust, safe, secure and aligned with our business strategy and organisational objectives. We are continuously investing in IT security and risk management frameworks to insulate IT assets and our digital transaction ecosystem from evolving external threats while upgrading our CRM infrastructure for efficient customer relationship management.

We are aggressively pursuing fintech collaborations especially in the IT space for better customer service, quick deployment of innovations, streamlining internal processes, reducing IT infra and development costs while improving compliance and risk frameworks.

As far as the AA system is concerned, it is still evolving. We are playing a wait and watch strategy for now but definitely we will take a decision on joining AA in near future.

What investments have been planned on the digital front to make systems more prompt and active?

The bank has embarked on a strategic journey driven by digital and technology transformation, which is aimed at putting it on a sustainable path of robust profitable business growth. We are exploring tie-ups with fintechs to venture into areas like co-lending, digital on-boarding of customers, credit risk automation and data analytics.

Large banks have come up with SuperApps. Is J&K Bank planning something to boost its digital presence?

We already have a very robust mobile banking application and are in the process of providing multiple functionalities through our m-pay, making it our flagship digital channel. We are also in the process of having our own mobile application development platform to achieve the objective of delivering continuous innovations in our mobile banking application portfolio. And in order to have a focused approach on digital banking, we are establishing a separate digital banking vertical which shall manage and drive the digital banking services of the Bank making it a digital hotspot in the banking landscape.

Has coming under the purview of CVC and CAG helped improve transparency in operations at J&K Bank? To what extent have things changed from the past?

Being a government company with majority shareholding of J&K and Ladakh governments, we were already under the purview of CAG. However, the voluntary adoption of CVC guidelines and implementation of RTI in 2019 has surely strengthened governance and accountability further within the organisation. These enhanced governance measures have improved our ability to check the adequacy, fairness of the procedures, the underlying motives, besides the nature and scope of the discretionary powers vested with various delegated levels of authority.

The purpose is to enhance transparency and efficiency of the bank.

Has the arrest of the former chairman of J&K Bank and other past controversies impacted the bank in any way?

Most of what has been referred to here is about probes that were initiated in 2019 by the country’s investigating agencies, at both the local and national levels, wherein the bank continues to cooperate fully. But I believe institutions are always bigger than individuals and no controversy can and should impact an institution that has remained open to thorough legal investigation with a stated purpose to strengthen transparency and accountability within the organisation while allowing law to take its own course.

Does the bank intend to transfer some of its bad loans to government-backed NARCL?

Yes. We have a significant exposure in some large borrowers under consortium and multiple banking arrangements and may transfer some of these accounts to NARCL as and when the bad bank starts acquiring NPAs from lenders.

Since NARCL will acquire bad assets by making an offer to the lead bank of the consortium, therefore any further action will be based on the decision of the consortium. Pertinently, one large NPA account, wherein our bank too figures in the list of consortium of lenders, was recently identified by IBA for sale/transfer to NARCL and we have already given an in-principle consent to the lead bank.