KCCI Welcomes J&K Bank’s ‘Karz Se Mukti’ Extension: A Lifeline for Businesses Amid Economic Distress

Karz Se Mukti: J&K Bank’s Lifeline for Kashmir’s Business Sector Gets a Much-Needed Extension

By: Javid Amin | Srinagar | 02 July 2025

A Valley in Economic Recovery Mode

In a region as volatile and economically fragile as Jammu and Kashmir, every policy decision can have sweeping consequences for its struggling business ecosystem. One such decision—a two-month extension of the “Karz Se Mukti” scheme by Jammu & Kashmir Bank—is more than just a deadline shift. It is a lifeline, a gesture of trust, and a bridge between temporary despair and long-term recovery for thousands of local entrepreneurs.

The Kashmir Chamber of Commerce and Industry (KCCI), representing the collective voice of the business community, has formally acknowledged and appreciated this critical extension as a timely intervention by the bank, following its urgent appeal. The deadline now extends to September 1, 2025, offering a reprieve for borrowers who had opted into the Special One-Time Settlement (OTS) scheme but found themselves financially crippled in the wake of April’s unforeseen events.

Let’s break down what this scheme means, why the extension was crucial, and what this tells us about the financial ecosystem in Kashmir today.

What Is the ‘Karz Se Mukti’ Scheme?

The Karz Se Mukti (Freedom from Debt) scheme was launched by J&K Bank as a Special One-Time Settlement (OTS) initiative to support stressed borrowers in Jammu and Kashmir.

🔍 Key Objectives:

• Enable businesses to settle long-standing non-performing loans through a structured, one-time payment plan.

• Prevent further deterioration of borrower credit profiles.

• Restore credit eligibility for future borrowing and expansion.

• Reduce the bank’s NPAs (Non-Performing Assets) in a sustainable way.

Introduced earlier this year, the scheme allowed eligible businesses to register by March 31, 2025, with an initial repayment deadline of June 30, 2025. But for many, that window proved too narrow—especially after the devastating disruption following the April 22 Pahalgam attack, which brought the tourism-driven economy to a standstill.

Economic Background: The Crisis That Demanded Relief

The April 22 Pahalgam Incident

The tragic incident that took place in Pahalgam earlier this year sent shockwaves across Kashmir. Beyond the loss of lives and psychological trauma, it triggered an economic chain reaction:

• Tourism—the region’s backbone—was abruptly halted.

• Hotels and transport services saw cancellations for the entire season.

• Artisans, shopkeepers, and hospitality workers faced immediate losses.

• SMEs and traders, already under stress from post-COVID debt, suddenly lost months of expected revenue.

It was in this atmosphere of economic paralysis that KCCI approached J&K Bank, urging an extension of the Karz Se Mukti repayment deadline.

Responsive Governance: Who Made It Happen?

The Chamber expressed deep gratitude to several key figures for their prompt and positive response:

• Lieutenant Governor Shri Manoj Sinha

• Former Chief Minister Mr. Omar Abdullah

• Chief Secretary Mr. Atal Dullo

• Managing Director & CEO of J&K Bank, Mr. Amitava Chatterjee

Their coordinated efforts resulted in the deadline extension to September 1, 2025, giving businesses a fighting chance to regain stability.

Why the Extension Was Critical: Voices from the Ground

Mushtaq Ahmad, Owner, Handicraft Store – Baramulla:

“I had opted into Karz Se Mukti with hope. But after Pahalgam, tourist footfall dropped to zero. I simply couldn’t pay back in June. This extension gives me time to breathe.”

Shazia Bano, Boutique Hotel Operator – Anantnag:

“June was impossible. Our entire income disappeared. The new deadline gives us hope to recover some bookings in August and September.”

🛠️ Bashir Lone, Auto Parts Dealer – Srinagar:

“I’ve seen businesses shut down because they couldn’t pay back on time. J&K Bank’s move is smart—it protects both borrowers and itself.”

These real-life testimonials underscore the practical significance of what may seem like a routine administrative decision.

Deep Dive: What Does the Scheme Offer?

The Karz Se Mukti scheme is not just about waiving loans. It’s a structured, rehabilitative framework to help revive business health.

Key Features:

• Applicable to small and medium borrowers

• Discounts on principal and interest depending on settlement period

• Legal immunity from further recovery proceedings upon settlement

• Clean credit report for future lending

• Support for account classification from NPA to “standard” after payment

The scheme directly aligns with MSME revival goals and contributes to debt restructuring without lengthy legal processes or asset seizures.

The Bigger Problem: Economic Fragility in Kashmir’s Trade Ecosystem

While the Karz Se Mukti extension is commendable, it also lays bare a painful truth: Kashmir’s business sector remains highly vulnerable to even short-term disruptions.

Core Challenges:

• Over-dependence on tourism and seasonal trade

• Lack of insurance or risk hedging mechanisms for MSMEs

• Difficult access to emergency capital

• Credit score damage from temporary NPAs

• No institutional counseling or debt advisory mechanisms

Without structural reforms, the Valley’s business community will remain a few shocks away from collapse.

KCCI’s Role: Advocacy, Representation, Action

The Kashmir Chamber of Commerce and Industry (KCCI) has evolved into more than a trade body. It is now a watchdog, negotiator, and support system for the region’s economic ecosystem.

Recent Contributions:

• Pressing for loan restructuring post-COVID

• Advocating for GST exemptions on handicrafts

• Urging power subsidy for cold storage units

• Lobbying for tourism revival campaigns

In the case of the Karz Se Mukti extension, KCCI’s quick communication with the Bank and J&K administration ensured timely relief—a shining example of effective institutional advocacy.

What’s Next? Demand for a New, Enhanced OTS Scheme

While acknowledging the relief provided, KCCI has also renewed its request for a broader One-Time Settlement scheme with a higher monetary ceiling, aligned with MSME guidelines issued by the Reserve Bank of India (RBI).

KCCI’s Proposal:

• Include borrowers with dues exceeding ₹50 lakh

• Allow longer repayment timelines (6–12 months)

• Offer partial debt forgiveness based on repayment ability

• Integrate with government-backed MSME support funds

Such a scheme would address larger, yet equally distressed enterprises, many of which were ineligible under Karz Se Mukti due to loan amount limits.

Public Sentiment: Relief with a Reminder

While there is gratitude, there is also public scrutiny. Many ask:

• Why aren’t such schemes announced proactively, rather than after economic damage?

• Why can’t the bank implement a rolling, auto-adjustable relief model based on district-specific events?

• Can these schemes be made available online with instant approvals for smaller dues?

Kashmir’s business stakeholders aren’t just looking for relief. They want resilience—systems that can anticipate crisis and act before it becomes survival.

Long-Term Vision: Building Economic Immunity in the Valley

If J&K Bank’s recent actions signal anything, it’s that a more compassionate, context-aware banking system is possible. But that alone won’t fix the ecosystem.

Suggested Roadmap:

1. Public-private business support desks in each district

2. Loan-linked insurance coverage for tourism and agriculture

3. AI-based credit risk monitoring for micro and small businesses

4. Rotational business grants for disaster-impacted sectors

5. Mental health support for distressed entrepreneurs

Such steps will not just revive the Valley’s economy—they will future-proof it.

Conclusion: A Small Shift, A Big Signal

The extension of the Karz Se Mukti scheme by J&K Bank, backed by the support of KCCI and senior government officials, is more than just a bureaucratic win. It’s a gesture of empathy and realism, an acknowledgment of Kashmir’s unique economic terrain.

For businesses still gasping for stability, this is a rope thrown in turbulent waters. And perhaps, the beginning of a more robust, flexible financial system that understands not just balance sheets—but lived realities.

Summary: Key Takeaways

Press Release

The Kashmir Chamber of Commerce and Industry (KCCI) conveys its deep appreciation to the Jammu and Kashmir Bank for extending the repayment deadline under its Special One-Time Settlement Scheme — Karz Se Mukti — by two months i.e. (up to 01-9-2025).
This much-needed relief comes in direct response to the Chamber’s request and reflects the bank’s continued commitment to the welfare of the business community in Jammu and Kashmir.

KCCI especially thanks the Lieutenant Governor, Shri Manoj Sinha , the Chief Minister Mr.Omar Abdullah , Chief Secretary Mr. Atal Dullo , Managing Director and CEO of J&K Bank, Mr. Amitava Chatterjee, for their timely intervention.
The Chamber had strongly raised this issue in view of the prevailing economic distress in the Valley, particularly after the unfortunate Pahalgam incident on April 22, which severely disrupted tourism, trade, and overall business activity.

The Karz Se Mukti scheme has offered vital support to struggling borrowers by enabling them to settle long-standing dues. However, the original repayment deadline of June 30 posed challenges for many who, despite availing the scheme by March 31, were unable to arrange funds due to the sudden downturn. The extension will go a long way in allowing these enterprises to fulfill their obligations and avoid slipping into deeper financial hardship.

KCCI also recalls with appreciation the assurance given earlier by the J&K Bank management regarding the launch of a new One-Time Settlement scheme with a higher ceiling, aligned with MSME guidelines. Such an initiative is eagerly awaited by a large segment of borrowers who could not benefit from the existing framework. The Chamber urges the bank to consider announcing this enhanced scheme at the earliest, to extend the same relief to larger but equally stressed accounts.

J&K Bank’s responsiveness and sensitivity to the needs of local businesses send a strong signal of support and solidarity. KCCI looks forward to continued collaboration with the bank to strengthen the region’s financial resilience and accelerate economic revival.

Faiz Ahmed Bakshi
Secretary General

The Kashmir Chamber of Commerce & Industry INC.

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