Jammu & Kashmir (J&K) Bank is seen reporting a decline in profit for the quarter ended September, chiefly due to increased slippages arising from months of political unrest in its key area of operations.
The bank, while issuing a profit warning to investors in October, had hinted that the quantum of loans in danger of turning into NPAs (non-performing assets) could be between Rs 10,000 crore and Rs 12,000 crore. “An additional provisioning of 5% on a portfolio of say Rs 10,000-Rs 12,000 crore would involve a large amount,” bank’s chairman and chief executive Parvez Ahmed had said.
He added that “all the business loans” in Kashmir were under stress and had been categorised as special mention account 2 (SMA2) assets, only a step away from being classified as NPAs. The RBI guidelines define SMA2 loans as those where the payment of principal or interest has been overdue for between 61 and 90 days.
According to the bank’s annual report, half its loan book comes from J&K. In Q1, the lender had reported a profit of Rs 22.9 crore after making provisions to the tune of Rs 313.7 crore.
It had twice deferred the announcement of its second-quarter results as it waited to hear from the Reserve Bank of India on its request for a special dispensation for assets impaired as a result of the unrest.
Ahmed had also said the pain on account of bad assets could persist beyond the September quarter. “Our NPA level, as on June 30, was around 9.3% and I would like to inform you that there could be further slippages in the coming quarters and, coupled with the restructuring of the stressed asset portfolio in J&K due to the unrest in the Kashmir Valley, we may entail additional provisioning, resulting in negative bottom line growth during the current fiscal and the trend may continue in the next two quarters also,” he had told investors.