 "Amitava Chatterjee, MD&CEO, J&K Bank")
Amitava Chatterjee, managing director and chief executive officer of J&K Bank, says the bank has shifted its focus to its Rest of India branches following the Pahalgam terrorist attack and the natural calamities that hit the region. In a telephonic interaction with Manojit Saha, he said the bank expects 50 per cent of its loan book to come from these branches within two years. Edited excerpts:
How did the bank navigate the impact of the Pahalgam terror attack and subsequent natural calamities, which would have affected business?
Yes, all of this impacted business in Jammu and Kashmir, as we had anticipated. As a result, we shifted J&K Bank’s business focus more towards our Rest of India branches. If you look at the growth, business in Jammu and Kashmir saw 5-6 per cent growth, while almost 16 per cent growth came from Rest of India.
Regarding non-performing assets and stress levels, they have actually improved since March. We’ve also been able to contain the rise in special mention accounts, although there was a slight increase due to stress in transport accounts, which were affected by the slowdown in tourism.
Margins also declined in the second quarter (Q2). Do you think they have bottomed out?
J&K Bank’s margin has declined from 3.9 per cent a year ago to 3.56 per cent in Q2. Rate cuts by the Reserve Bank of India (RBI) are immediately passed on to the loan book, but it takes around five to six quarters for deposits to reflect these cuts. I believe that if there are no further rate cuts in 2025-26 (FY26), margins will gradually improve.
Is there a pickup in corporate loan demand?
Yes, there is strong interest from the corporate sector. Even in Kashmir, private-sector players are actively engaging with government officials for land allotment and setting up industries. At least two major manufacturing companies have approached J&K Bank for funding.
The bank aims for a loan book split of 50 per cent from Rest of India and 50 per cent from J&K. What is the current proportion?
It was 70:30, and now it has shifted to 65:35. I have a two-year timeline to achieve the 50:50 target.
Current and savings account (casa) ratio improved in Q2 to 45.9 per cent. Where do you see it in the coming quarters?
Being a strong bank in this geography, casa has been a stable source of our deposits. We aim to improve it to 48 per cent by the end of FY26.
The RBI has released draft expected credit loss norms. Are you planning to seek any clarification?
The draft norms propose 5 per cent provisioning for unsecured loans. I believe that loans backed by salary accounts, where the entire salary is credited to J&K Bank, should not be treated as completely unsecured. I am seeking clarification from the RBI on this treatment.
There was an impairment provision of Rs 92 crore in Q2 for investment in Jammu and Kashmir Grameen Bank, in addition to the provision of Rs 87 crore made in the previous quarter. Can you shed some light on the issue?
One of the regional rural banks of SBI – Ellaquai Dehati Bank– was merged with J&K Grameen Bank in the Jan-March quarter. Our bank is the only private sector bank in the entire country, which has a rural bank. As per RBI's latest guidelines, investment of the erstwhile sponsored bank has to be taken up by the new sponsor. So, we had to return back Rs 140 crore of investment to SBI. That investment is now in our books. EDB was in a very bad shape because of continuous losses and erosion of net worth. So, as per the RBI guidelines, we had to provide for the impairment. On the positive side the merged entity has turned into profit this quarter [Q2].
