Govt to take 6 months to divide J&K Bank assets, liabilities and ownership

With the new development, the Centre will automatically get the 60% share that the state of Jammu and Kashmir holds, but via the Union Territories

The government will take six months to divide the assets, liabilities and ownership of J&K Bank and other state government-floated companies between the Union Territories of Jammu & Kashmir and Ladakh, according to the Jammu and Kashmir Reorganisation Bill, 2019, which was cleared by Parliament on Tuesday.

First, the central government will form one or more advisory committee(s) within 90 days for the asset and liability division between the two Union Territories. The committees will have to submit their reports within six months to the lieutenant governor of the Union Territory of Jammu & Kashmir, “who shall act on the recommendations of such committees within a period of 30 days from the date of receiving such reports,” clause 85 of the Bill said.

With the new development, the Centre will automatically get the 60 per cent share that the state of Jammu and Kashmir holds, but via the Union Territories, experts said.

However, that doesn’t mean that the bank will become a ‘nationalised bank’; it will be ‘other’ public sector bank, like IDBI Bank, they said. 

J&K Bank may be allowed to continue as a “private sector bank”, with the Centre having the largest share.

“The government becoming the majority owner of a private sector bank doesn’t automatically make it a public sector bank. The US government held the largest share in Citibank and others during the crisis period, but they continued to remain private sector banks,” said a senior analyst.

“Besides, having a private sector bank under government control also plays up to the agenda of the government of portraying a business-friendly environment,” said the analyst.

Even after IDBI Bank is owned by Life Insurance Corporation of India (LICI), which in turn is fully owned by the government, it is still called a ‘private sector’ bank.

However, unlike IDBI Bank, J&K Bank remained a single-state focused entity with total advances of just about Rs 60,000 crore.

J&K Bank follows the wage structure of advocated by the Indian Bank’ Association (IBA) but sometimes takes part in wage negotiation with the unions. Most of the operation of the bank is like that of a public sector bank, except, according to the experts quoted above, the bank is controlled heavily by local politicians and is mired in corruption charges by investigative agencies.

On July 4, the Reserve Bank of India (RBI) appointed its former executive director A K Misra as additional director on the bank’s board. Generally, the post was reserved for junior functionaries of the central bank.