We've the ability to absorb sudden shock in the system: Mushtaq Ahmad

Interview with Chairman & Chief Executive Officer, J&K Bank

A media report accusing Jammu and Kashmir (J&K) Bank of window-dressing its accounts and concealing stressed loans worth Rs 2,500 crore created panic among investors last week. Mushtaq Ahmad, chairman and chief executive officer of the lender, majority-owned by the state government, rebuts the allegations, in an interview with Somasroy Chakraborty. Edited excerpts:

A news report has accused the bank of window-dressing its accounts...

It is absolutely false. We have already published our audited results (for 2013-14). Our gross non-performing assets (NPAs) were Rs 783 crore, while the restructured asset portfolio was Rs 1,570 crore at the end of the year. The restructured book has declined further to 1,400 crore; it was Rs 2,700 crore four or five years before. We have been improving our performance year-on-year and managing stress efficiently. We have evolved a system to effectively monitor accounts that are stressed. Also, a stressed account does not always turn into an NPA. It requires close monitoring and on several occasions, we have been able to revive such accounts.

You have a loan exposure to REI Agro, against which United Bank of India  has filed a winding-up petition. What’s the status of that account?

A consortium of 21 banks lent over Rs 5,000 crore to that company. Our exposure is Rs 700 crore. Also, the account is classified as standard by 17 banks, including us. Only three or four banks, with 9-10 per cent of the total loan exposure, have declared it an NPA. Probably, the winding-up petition triggered panic. We will have a joint lenders' meet to decide on the course of action. Given the current environment, the account might require restructuring; the lenders will have to take a collective decision.

Is there any stress on your real estate portfolio?

We have exposures in three or four real estate companies and most are performing well. There was one instance of a cheque bounce but the borrower has paid the due.

Where do you see your gross NPAs at the end of March 2015?

Our gross NPA was 1.66 per cent at the end of last year. Excluding the exposure to REI Agro, I expect our gross NPA level to stay below two per cent at the end of March 2015. Also, I expect our restructured loan portfolio to remain in the range of Rs 1,300-1,900 crore. One must remember there has been stress in the system for three or four years; we have been managing it fairly well. We are confident of managing the quality of our portfolio in the coming quarters. We have the ability to absorb any sudden shock in the system.

Do you plan to raise capital in the near future?

We have a strong capital adequacy ratio (12.69 per cent by Basel-III at the end of March. So, there is no immediate need to raise money. I think we have adequate capital for at least the next two to three years. In case we need money, we will seek capital infusion from the state government (which owns 53.17 per cent in the bank).

Are you putting foreign expansion plans on hold?

Overseas expansion is very much on our mind. We are exploring possibilities to establish our presence in centres like Dubai and London.