Banks not lending enough in J&K: Drabu

‘ARC to purchase bad loans to encourage banks increase advances’ 

Finance Minister, Dr Haseeb Drabu today said that Jammu and Kashmir State Financial Corporation (J&KSFC) shall be turned into an Asset Reconstruction Company (ARC) that can purchase bad loans from various financial institutions operating in the state.
Banks not lending enough in J&K - DrabuDr. Drabu, who was speaking at the 55th Annual General meeting of shareholders of J&KSFC, said that the move will go a long way in improving credit flow into the state. “There are around 45 banks and financial institutions and majority of them are not lending enough. So let us reinvent the corporation into an ARC that will purchase the bad loans from these banks and relieve them of the burden. This in turn will encourage banks to increase their advances in the state,” the Finance Minister said.  “The ARC shall have exclusive access to a sustainable non-fund based income model. Some of the SFCs like that of Karnataka have successfully implemented this model.”
Advising an immediate turnaround and as a future business strategy, Dr. Drabu said the corporation has a golden opportunity which it should explore. He said the corporation can not only speed track its own recovery processes but can also reinvent itself as an ARC.
The Finance Minister said that ARC with some specialization can turn these impaired assets into successful units. “After the economic meltdown in South East Asia, governments heavily invested in bad assets and turned them around. It became the basis of their economic boom,” the Finance Minister said. “Same model can be applied here and it will also unlock around Rs 1000 crore in our blocked assets.”
Dr. Drabu said that the state government is currently looking at creating a new Financial Architecture in the state. “The corporation needs to find out the right mix of strategy and space for itself that it can relate to, compete with and complement the activities of other financial institutions operating in J&K,” he said.
The Finance Minister also advocated minimizing the share of government from 70 to 51 percent in the corporation to make it more independent. “Let the management sit around the drawing board and create a roadmap for the organization. Then government will step in to create an institution of global standards out of the Corporation” Drabu added.

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