FCIK pushes for special settlement scheme to resolve MSME NPAs in J&K

Srinagar, Feb 18: The Federation of Chambers of Industries Kashmir (FCIK) has formally submitted a comprehensive representation to the Chief Minister Omar Abdullah outlining practical and urgent measures for the Special One-Time Settlement (SOTS) Scheme currently under active consideration of the J&K Bank management.

A statement issued here said that the representation, copies of which have also been shared with senior Government authorities and the management of J&K Bank, underscores the urgent need for a structured framework to resolve long-standing legacy MSME NPAs, restore entrepreneurial confidence, and provide a clear, actionable pathway for distressed units to restart operations—paving the way for a sustainable and renewed revival of the regional economy.

The submissions call for the Government’s support, as the major equity holder in J&K Bank, in formalising a calibrated, non-discretionary, and non-discriminatory SOTS, distinct from routine OTS frameworks, to serve as a structured legacy-closure instrument.

Such a scheme, FCIK notes, would enable recovery of otherwise stuck assets, provide balance sheet clarity to the Bank, restore entrepreneurial dignity, revive credit culture, and unlock fresh economic activity. The proposal draws upon regulatory precedents issued by the Reserve Bank of India and settlement schemes implemented by leading public sector banks, aligning the framework with contemporary MSME classifications and current economic realities.

Highlighting the unique relationship between the people of the region and J&K Bank, FCIK recalls that during decades of turbulence, the Bank remained the principal financial lifeline while most other banks and institutions withdrew operations.

“However, the people reciprocated by placing extraordinary trust in the institution, shifting their deposits to the Bank, with over 90 percent of funds still originating from within the Union Territory,” FCIK noted, emphasising that this stable, low-cost funding base has underpinned consistent growth and record profitability for the institution.

The Federation submitted that this mutual trust must now guide a balanced and forward-looking resolution of legacy stress, especially as the majority of MSME NPAs reflect accumulated historical stress rather than willful default.

Drawing on RBI guidelines and national precedents, FCIK proposed that the SOTS cover NPAs up to at least 50 crore. The suggested framework includes waiver of unapplied and penal interest, rational principal settlement with calibrated haircuts, inclusion of failed OTS, technically written-off accounts and cases under litigation, delinking relief from collateral value, reduced 5% upfront amount for application processing, repayment window up to 2 years and a transparent, rule-based mechanism without subjective exclusions.

The objective may not be concessions but closure—cleaning up historical NPAs, restoring entrepreneurial dignity, unlocking stuck capital, and enabling fresh credit expansion.

FCIK has expressed deep concern over the daily-based resurfacing of daily SARFAESI “name and shame” notices and e-auctions in local newspapers, following a year of significant restraint during which the Bank’s leadership had repeatedly assured borrowers of a forthcoming solution. The continuation of such public actions has not only undermined borrowers’ financial credibility but also caused social distress and reputational damage within the community.

The Federation has urged that, pending formal notification of the SOTS Scheme, such coercive actions be temporarily suspended to provide distressed units a fair opportunity to resolve legacy liabilities under a structured framework. Once the Scheme is operational and adequate time is given, recovery proceedings may proceed against those who choose not to avail the opportunity.

FCIK stressed that economic renewal in J&K cannot be built on unresolved historical stress and public humiliation of entrepreneurs.

“A time-bound, compassionate, and well-structured SOTS Scheme can become a landmark healing initiative—honoring past resilience, resolving accumulated distress, and laying the foundation for renewed growth, investment, and employment generation”, observed FCIK.

The Federation has reaffirmed its full readiness to cooperate with the Government and the Bank in ensuring smooth and effective implementation of this critical initiative.