Kashmir Business Body Urges Bank to Extend Debt Relief Deadline After Pahalgam Crisis
Srinagar | 24 June 2025
As the clock ticks down toward the June-end repayment deadline of Jammu and Kashmir Bank’s “Karz Se Mukti” One-Time Settlement (OTS) Scheme, anxiety looms large over hundreds of Valley-based business owners. Many say they simply don’t have the cash flow to meet the bank’s requirement—through no fault of their own.
In a strongly worded appeal, the Kashmir Chamber of Commerce and Industry (KCCI) has urged Jammu and Kashmir Bank to extend the repayment deadline under the Special OTS scheme by at least six months, citing continued economic distress following the Pahalgam incident earlier this year that triggered a chain reaction of lost revenue, tourism cancellations, and commercial disruption.
What Is “Karz Se Mukti”?
The Karz Se Mukti Scheme, a limited-time financial relief initiative launched by J&K Bank, allowed eligible borrowers to settle long-overdue loans through a structured settlement window. Borrowers who applied and were approved by March 31, 2025, were expected to make full payment by June 30, 2025 to close their accounts on favorable terms.
Designed as a financial reset, the scheme was particularly aimed at small and medium-scale business owners and traders who had slipped into non-performing asset (NPA) status due to years of disruption—be it from political uncertainty, pandemic lockdowns, or natural disasters.
But while the scheme brought initial relief and enthusiasm, the ripple effects of the Pahalgam tragedy, which took place just weeks after the cutoff date, have since made repayment unrealistic for many.
What Happened in Pahalgam—and Why It Still Matters
The Pahalgam incident in April, though brief, triggered nationwide headlines and a sharp decline in tourist inflows—affecting transporters, hoteliers, artisans, adventure operators, and small businesses dependent on seasonal footfall.
According to KCCI estimates:
- Tourist bookings dropped by 38% in April–May compared to 2024
- Hotel cancellations peaked during Eid week—a critical season for local businesses
- Retail spending in key markets like Anantnag and Pahalgam plummeted
- Apple trade and logistics briefly stalled due to security restrictions
“Most borrowers relied on the early tourist season to generate the cash required for OTS repayment. With that ecosystem disrupted, they are now being pushed toward default—despite wanting to pay,” said a senior KCCI official, speaking on condition of anonymity.
Voices from the Ground: “We Want to Pay—Just Not This Way”
Ghulam Rasool, a tour operator from Anantnag, is among those caught in the dilemma. He took the OTS offer with a promise to repay ₹5.6 lakh by June-end. “I rented new vehicles in anticipation of tourist season. But after what happened in Pahalgam, my bookings vanished overnight. We still want to pay—but we need time,” he explains.
Across sectors, a similar story unfolds:
- Hoteliers who stocked supplies for summer guests are sitting on inventory and debt
- Batik artisans in Pampore say foreign buyers cancelled orders
- Shikara operators, already reeling from earlier downturns, are unable to contribute even small installments
“Instead of being pushed into another NPA cycle, the bank should give them six more months,” says Dr. Mubeen Shah, a founding member of KCCI. “Not every story of non-repayment is a story of non-will.”
What Is KCCI Demanding?
KCCI’s appeal, sent both via formal representation and press note, includes two major asks:
Extend the OTS Deadline by Six Months
The Chamber has urged J&K Bank to push the deadline from June 30 to December 31, 2025, giving affected borrowers a realistic window to recover funds and honor the terms.
KCCI says such an extension:
- Aligns with the ground reality of disrupted cash flow
- Restores faith in institutional compassion
- Prevents account holders from sliding into wilful defaulter status
Announce a New OTS Scheme for Larger Borrowers
KCCI reminds that the J&K Bank leadership previously committed to rolling out a more inclusive OTS version in line with MSME guidelines, which would raise the ceiling and extend relief to medium and large borrowers who were left out of the initial scheme.
“This is about trust and economic logic,” the KCCI statement reads. “The earlier OTS policy helped retail traders, but larger enterprises—employing dozens—are also struggling. Without structural relief, we risk a cascading wave of insolvencies.”
What Data Tells Us: A Sector-by-Sector Breakdown
In its internal survey conducted this month, KCCI shared provisional data on how various sectors fared since the Pahalgam disruption:
| Sector | Revenue Dip (Apr–Jun) | OTS Beneficiaries at Risk |
|---|---|---|
| Tourism & Transport | –42% | High |
| Handicrafts | –37% | Moderate |
| Horticulture & Apple | –25% | Low |
| Retail & Wholesale | –31% | Moderate |
| Manufacturing (MSMEs) | –28% | High |
What Are the Legal Options?
While OTS schemes are often discretionary, the Reserve Bank of India (RBI) has issued guidelines encouraging lenders to frame inclusive, non-coercive settlement frameworks, especially in post-crisis regions.
Legal experts suggest that banks can:
- Extend repayment windows for genuine hardship cases
- Introduce tiered OTS schemes tied to account size and sector
- Provide collateral-secured bridge loans for eligible OTS payees
“Unless credit policy accounts for climate, conflict, or community risk, it becomes blind to context,” said Advocate Abid Majeed, a Srinagar-based banking law expert.
What If the Extension Is Denied?
The fear among borrowers is sharp: defaulting on a special OTS deal carries heavier reputational and legal risk than regular EMIs.
If no extension is granted:
- Accounts could be tagged “non-compliant,” attracting penalties
- Many may lose access to future credit, GST renewals, or business tenders
- A spike in legal recovery proceedings may follow, overwhelming courts and businesses alike
KCCI fears it could reverse much of the post-pandemic business recovery, undoing gains from the last two fiscal years.
A Call for Compassionate Capitalism
At its core, this is not just about delayed payments. It’s about safeguarding financial dignity during periods of legitimate struggle. KCCI believes that responsive institutions are the backbone of resilient economies.
In its closing note, the Chamber states:
“We’re not asking for waivers. We’re asking for wisdom. Give Kashmiri enterprises the oxygen they need to breathe—not a noose disguised as a deadline.”
Way Forward: Recommendations by KCCI
To stabilize the business landscape, KCCI has proposed:
- Extension of OTS window to Dec 31, 2025
- Immediate rollout of MSME-aligned OTS for larger accounts
- Sector-wise prioritization of relief, starting with tourism and manufacturing
- Quarterly consultation forums between banks, trade bodies, and borrower groups
- Transparency dashboards to track repayment trends and extension outcomes
Public Sentiment
On social media and within trade WhatsApp groups, the message is consistent: “We want to pay, but we need time, trust, and a humane process.”
Hashtags like #ReviveKashmirEconomy, #KarzSeMukti, and #OTSReliefNow are gaining traction as trade bodies and civic influencers push for the bank’s response.
Bank’s Response?
As of this writing, J&K Bank has not issued a formal statement in reply. However, sources close to the bank management hint that a policy review is under consideration, and a final decision may be announced before the current June deadline.
Until then, Valley entrepreneurs are left watching calendars and counting coins—hoping their intentions won’t be mistaken for inaction.
NO:KCC&I/PN/06/2025/ 4501 24th June, 2025
PRESS NOTE
The Kashmir Chamber of Commerce and Industry (KCCI) has been requesting that the Jammu and Kashmir Bank extend the repayment deadline under its Special One-Time Settlement Scheme — Karz Se Mukti — by six months in light of the recent economic setbacks faced by businesses across the Valley following the Pahalgam incident.
The OTS scheme, which allowed eligible borrowers to settle their outstanding accounts under a limited-time arrangement, had a repayment deadline set for the end of June for those who availed of it by March 31. However, given the loss of business activity and disruption in tourism, trade and commercial activities after the Pahalgam incident, many business owners have been unable to mobilise the required funds within the stipulated time.
KCCI appeals to Jammu and Kashmir Bank to extend the repayment period by at least six months, allowing borrowers an opportunity to honour the terms of the settlement in a more feasible timeframe. The Chamber believes that such a step would demonstrate the bank’s sensitivity to ground realities and its support for the local business community during difficult times.
Further, KCCI highlights that the J&K Bank management had earlier assured stakeholders of a new One Time Settlement (OTS) scheme with an enhanced ceiling as per MSME guidelines, which would benefit larger accounts that were left out of the earlier initiative.
The Chamber has called for the immediate announcement of this new scheme in line with MSME guidelines to provide relief to stressed enterprises operating at a larger scale.
With market sentiment remaining fragile and financial stress deepening across multiple sectors, KCCI believes that such timely and inclusive financial measures are critical to stabilising the business ecosystem and encouraging economic revival in Jammu and Kashmir.
Faiz Ahmad Bakshi
Secretary General
The Kashmir Chamber of Commerce & Industry INC.
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Website : www.thekcci.in
