A fresh agreement between the Jammu and Kashmir Government and the Reserve Bank of India on the role of the J&K Bank has put a spotlight on the National Conference’s Autonomy proposal, which has been conceived as one of the solutions to the long-standing Kashmir dispute.
With the RBI likely to take over the overdraft role of the J&K Bank from April 1, political analysts have begun to see the development as a ‘first dent’ in the NC’s autonomy proposal which naturally makes the financial autonomy of individual institutions a must. Economists don’t rule out certain fears associated with the pact. “If the mismatch between the central flow of funds and the requirement of plan funds continues with a wide time gap, then the state government may get into financial crisis. And if the state government manages its finances efficiently in terms of expenditure compression measures and in terms of maximum internal resource mobilization or in terms of tapping IRM potential, then the state government has no problem. At least it has an advantage that it will come out of the JK Bank overdraft debt. In that process, the state will save on an average over Rs 250 crores which is a huge sum for meeting the other development expenditure which otherwise would go to the JK Bank as interest payment on overdraft borrowing,” said noted economist. According so observers, the pact will make more idle funds available to the J&K Bank in a market already flush with money. “That is likely to reduce profitability of the Bank which could lead to forcing the government in a few years to sell its shares making it like any other Bank that will have only the J&K name tag like Travancore or Hyderabad or Rajasthan. It will cease to be a government company which employs only the state subjects,” said the former official in the Finance Department. “Extra money will become available to markets outside J&K not where the deposits take place. Losing the tag of being official bankers to J&K government would adversely affect its prestige that had seen it grow as number one private bank in India. But according to experts in Banking, it will be a win-win situation for the Bank and the state government. “I think the agreement says that the JK Bank will continue to be the banker to the state government but under the overall supervision and monitoring of the Reserve Bank of India, as is the case with others banks across the country,” says the former J&K Bank Chairman, Muhammad Yousuf Khan. He believes that it is not only the overdraft facility that makes the bank earn revenue. “If the bank would lend the overdraft amount, which it would give to the state government, to other institutions, it would earn more revenue,” Khan told Greater Kashmir.
With the RBI likely to take over the overdraft role of the J&K Bank from April 1, political analysts have begun to see the development as a ‘first dent’ in the NC’s autonomy proposal which naturally makes the financial autonomy of individual institutions a must. Economists don’t rule out certain fears associated with the pact. “If the mismatch between the central flow of funds and the requirement of plan funds continues with a wide time gap, then the state government may get into financial crisis. And if the state government manages its finances efficiently in terms of expenditure compression measures and in terms of maximum internal resource mobilization or in terms of tapping IRM potential, then the state government has no problem. At least it has an advantage that it will come out of the JK Bank overdraft debt. In that process, the state will save on an average over Rs 250 crores which is a huge sum for meeting the other development expenditure which otherwise would go to the JK Bank as interest payment on overdraft borrowing,” said noted economist. According so observers, the pact will make more idle funds available to the J&K Bank in a market already flush with money. “That is likely to reduce profitability of the Bank which could lead to forcing the government in a few years to sell its shares making it like any other Bank that will have only the J&K name tag like Travancore or Hyderabad or Rajasthan. It will cease to be a government company which employs only the state subjects,” said the former official in the Finance Department. “Extra money will become available to markets outside J&K not where the deposits take place. Losing the tag of being official bankers to J&K government would adversely affect its prestige that had seen it grow as number one private bank in India. But according to experts in Banking, it will be a win-win situation for the Bank and the state government. “I think the agreement says that the JK Bank will continue to be the banker to the state government but under the overall supervision and monitoring of the Reserve Bank of India, as is the case with others banks across the country,” says the former J&K Bank Chairman, Muhammad Yousuf Khan. He believes that it is not only the overdraft facility that makes the bank earn revenue. “If the bank would lend the overdraft amount, which it would give to the state government, to other institutions, it would earn more revenue,” Khan told Greater Kashmir.
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