No direct impact on bank due to dip in tourist numbers: Amitava Chatterjee

Neither a single branch was closed, nor was there any business disruption since April 22

Jammu & Kashmir Bank reported a net profit of ₹584.54 crore in the fourth quarter of the financial year 2024-25 (Q4FY25), down 8.5 per cent year-on-year (Y-o-Y). Amitava Chatterjee, MD & CEO of the bank, in an interview with Manojit Saha explains the reasons behind the financial performance and that there has been no direct impact on the business due to a dip in tourist numbers in the wake of the recent Pahalgam terror attack. Edited excerpts:

 

Has the bank’s business been impacted due to the recent Pahalgam terror attack? 

As a natural prudence, we have assessed how it will affect our bank. Our total exposure to the tourism industry, be it hotels, transport operators, is only 1 per cent of our total loan book. There were previous instances of tourism-related disruptions in this part of the country also. Traditionally, there is a lot of resilience in this particular sector in this state. Whenever such incidents happen, stress in that 1 per cent portfolio is not more than 14 per cent. And the stress comes down to 2-3 per cent in two years.

 

Also, traditionally the NPA level in this geography is pretty low. Here people have a high propensity to repay and not to default. So there is no direct impact due to a dip in tourist footfall for the bank.

 

Have you beefed up security in the branches in the aftermath of the Pahalgam terrorist attack? 

Not a single branch has been affected since April 22. Neither a single branch was closed, nor was there any business disruption. Yes, we have beefed up security in the branches, especially the border area branches. There is a lot of support from the state government also. They also know essential services like banking need to be continued.

 

This is a bordering state. If you consider the branches in Jammu and Srinagar, excluding these branches, the rest of them are in the border areas, which is not less than 100 branches.

 

What is the reason for the decline in Q4 net profit on a Y-o-Y basis? 

During the January-March quarter of 2024, there was a reversal of provision for employee gratuity of ₹230 crore. That was a one-time reversal. If you keep that out of the equation, our profit has grown by 37 per cent. 

 

The net interest margin for Q4FY25 was 3.88 per cent as compared to 3.77 per cent a year ago and 4.04 per cent in Q3. NIM for FY25 was 3.92 per cent, same as the previous financial year. What is the guidance for margins? 

In spite of two rate cuts, we have been able to maintain the NIM of 3.92 per cent. We have an advantage. We have the best possible CASA (current and savings account) deposit in the entire industry, which is at 47 per cent of total deposits. That helped us in maintaining the NIM and fortunately, there was almost a 2.9 per cent growth in the last quarter in CASA. Going forward, we will try to improve our CASA because we are now adopting technology more and more into our transactions and operations. Almost 90 per cent of transactions are happening through digital mode.

 

Already, there are two (policy repo) rate cuts (by RBI) and there would be more rate cuts. We have 52 per cent of our loans, which is linked with repo. Margin will be somewhere between 3.7 to 3.8 per cent. It is impossible for any bank to maintain an NIM of 4 per cent nowadays.

 

The other income has gone up 80 per cent to ₹404 crore. What was the reason? 

One, we have improved our investment on non-SLR instruments. But it was only for AAA rated entities. Also, income has come from recovery in technically written off accounts. We had a recovery of ₹380 crore from such accounts in FY25, of which ₹186 crore was in Q4.

 

Credit growth in FY25 was 11 per cent, deposit growth 10 per cent. What is the projection for the current financial year? 

We will keep the deposit guidance at 10 per cent and advances I would like to grow at 12 per cent. Even if tourism business is impacted, bank business will not suffer because most of the credit offtake is in sectors like agriculture and MSME. Also, in the rest of India we are present in 20 other states, where there are opportunities. I would love to increase it to 14-15 per cent, but I am keeping it at 12 per cent because of some procedural changes we need to make so that foundations become strong.

 

Do you have any fundraising plan? Will promoters, UT of J&K and UT of Ladakh together have 60 per cent stake, dilute stake? 

On dilution, they have not indicated anything at this moment. Capital adequacy ratio at 16.29 per cent is comfortable. At an opportune time, I need to go to the market to raise equity capital. That will give the government of the UTs to participate in that fund raising. Whether they will participate, we will wait and see. Also, I am not in a big hurry to raise funds. Going forward, I believe that a bank of this size should have a capital adequacy ratio of 18-20 per cent.