The JK Bank saga

Putting the whole thing in a perspective

Abdul Majid Zargar
Srinagar, Publish Date: Dec 5 2018 10:47PM | Updated Date: Dec 5 2018 10:47PM
The JK Bank sagaRepresentational pic

Before commenting on the specific act of J&K Bank, it needs to be stated that under the constitution of J&K, the powers of the Governor to frame laws, rules or policy decisions are limited to emergent situations requiring urgent attention. But going by his speed of changing laws & taking policy decisions, he is committing a sacrilege of the same constitution of which he is a creation. 

Now coming to the specific case of J&K Bank, it needs to be mentioned that this bank was incorporated in 1938 as a joint stock company under the state laws  with the joint efforts of  Kashmir Government and few local private enterprising individuals. It was a time when the contemporary India was not even born. Come 1947 and the temporary & conditional accession on three subjects of defense, foreign affairs & communication was entered by State with New-Delhi . J&K Bank, being outside the purview of these three subjects,  continued to act as the central  bank of J&K state looking after its fiscal & financial arrangements. Even the jurisdiction of   Reserve Bank of India Act 1949 or the banking regulation Act 1949, two principal Indian legislation on banks , didn’t apply to it. 

The first evil eye of New-Delhi fell on the bank  in 1956  when the process of gradual erosion of State autonomy was put in motion by New-Delhi  post 1953 coup-de-tat . The jurisdiction of above two laws was applied to J&K Bank in the same year and the bank came under the supervisory jurisdiction of  Reserve bank of India.

The second nail in the coffin came in 1973 when the public debt function of the state was taken over by RBI. No tears were shed then as the agenda of New-Delhi was being faithfully carried out by the ruling elite. For opposition, Beg-Parthasarthy talks had just started and the  beneficiaries –in-waiting too were not interested in frustrating the process.

The other part  of the financial arrangement ,however continued to remain with the J&K Bank. All Plan & non-plan Funds, tax & non-tax revenue  were transacted through this bank. The ways & means advance, meant to bridge the gap between receipt & payments of the State  was also provided by this bank. In more ways than one , the arrangement ,though considerably depleted by the ambush of 1956 &1973, was symbolic of uniqueness &  financial autonomy enjoyed by the State . And when it’s symbolic, it does not matter.

The third assault on the autonomous character of the bank was launched in 2010 when pursuant to a request of the State Govt. for a structural reform grant of Rs. 2300 crores  made through 13th Finance commission, the Union Finance Ministry agreed to provide   Rs. 1000 crores  in the first instance. As a quid-pro-quo, New-Delhi wanted  total financial control by Reserve  Bank of India under the garb of enforcing financial discipline .In the process J&K Bank was deprived  of the role of providing finances to Govt., its status of ‘Bankers to J&K Govt. snatched ’and its role reduced to just like any other bank in State. The then Finance Minster of the State defended this assault in the most bizarre words, one could have ever heard.

And now comes the proverbial last nail in the coffin of J&K Bank by classifying it as a Public sector undertaking (PSU) bringing  it within the ambit of  RTI Act as well as jurisdiction of chief vigilance commissioner (CVC) under the pretext of transparency. No-body is or should be against the transparency in the working of the bank. But one should also know that banks survive on public trust and its affairs cannot  be a matter of street debate. That is why Banking regulation Act 1949, permits a bank to create secret reserves & keep certain figures, like provision for bad & doubtful debts, out of public gaze by allowing banks to adjust these  directly  through these secret reserves.

Now let us come to specifics. As far as application of RTI Act is concerned, former Chief information commissioner has already held in favor of application of RTI Act on bank. The said decision has been disputed by the bank and the matter is pending adjudication before the J&K High Court. The Governor should have at least waited for the Honb’le Courts decision before giving his own on the issue.

The only agenda in classifying  J&K Bank as a PSU is to exercise greater control & influence over this institution which has kept the wheels of Kashmir economy moving even during the most turbulent times. 

(The author is a practicing Chartered Accountant)

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