Jammu & Kashmir turns paradise for new-age private banks

If you were in Jammu & Kashmir (J&K) a decade ago, you might have had to walk miles before you saw a branch of a new-age private sector bank. But today, you will locate one easily - not only in the bylanes of Srinagar but even in the under-banked regions and rocky terrains of Doda, Poonch and Kargil.

It might be one of the less-developed states but J&K is emerging as the new business destination for new-generation private banks.

In 2013 calendar year, ICICI Bank, the country's largest private-sector lender, more than doubled the number of its branches in the state to 25. HDFC Bank has 64 branches, the most in the state among India's new-age private banks. Of these, 45 have been opened over the past five quarters and almost 60 per cent are in semi-urban and rural areas. Since April 2013, Axis Bank's branch count in the state has increased from six to 26. Of these, 14 were opened in un-banked regions.

BANKING ON POTENTIAL

Number of branches in J&K

• HDFC Bank: 64 (up from 8 in 2011)
• ICICI Bank: 25 (More than double from that in 2012)
• Axis Bank: 26 (6 in April 2013)

Industry analysts see the return of peace in the Valley in recent times as a key reason prompting private banks to expand their reach in the state. However, bankers say the business opportunity in J&K's under-penetrated regions are tempting enough for them to increase branch strength there.

"We went there with our professional acumen, sensing a business opportunity. We realised the basic fundamentals for growth in economic activities in J&K were in place. We felt the indicators were strong enough to expand our footprint and distribution network," Ravi Narayanan, branch banking head at HDFC Bank, told Business Standard.

That there is an opportunity for banks in the Valley is reflected in the financial performance of Srinagar-based Jammu & Kashmir Bank.

The old-generation private lender reported its highest net profit - of Rs 1,055 crore - in 2012-13. The bank has now set the target of taking its net profit to Rs 1,800 crore by 2015-16 and aims to have over the next three years a distribution network of 1,000 branches -800 of those operating out of J&K.

Buoyed by the success, most private banks plan to add branches in coming months to strengthen their distribution network in the state. ICICI Bank, for example, aims to open 10 new branches in the next couple of months, while Axis Bank plans to have presence in all of the state's district headquarters by 2015. YES Bank, the country's youngest lender, will add three to five branches to its existing network of five in J&K over the next two years.

"As the economy of the state continues on the road to recovery, we want to serve the financial needs of the people through smart use of technology, differentiated products and services," says Rajiv Anand, president (retail banking), Axis Bank.

Apart from consumer credit, there is also a demand for small and medium enterprise finance, working capital & business loans and farm credit, bankers say.

"Our branches (in J&K) offer the whole gamut of products and services we offer in other geographies. But since the economy is predominantly agrarian, we see good opportunities in farm lending for products like apple, walnut, apricots, etc," HDFC Bank's Narayanan says.

According to a report by the committee for evolving a composite development index, chaired by Raghuram Rajan (now the governor of the Reserve Bank of India), J&K ranks 14th among the country's 28 states in development.