FCIK seeks govt’s intervention in shaping ‘special one-time settlement’ scheme fairly

Srinagar, Dec 22: The Federation of Chambers of Industries Kashmir (FCIK) has urged the Omar Abdullah government to actively shape a fair and non-discriminatory Special One-Time Settlement Scheme (SOTS), reportedly set to be launched by Jammu Kashmir Bank for Non-Performing Assets (NPAs) in January 2025.

The Chamber emphasised that the government, as the bank’s majority shareholder and representative of the people, must play a pivotal role in developing and approving the scheme. Such intervention is necessary to address the severe impact of nearly three thousand days of business disruptions caused by decades of turmoil, natural calamities, and other challenges, which have led to significant hardship and capital erosion for local businesses.

“During this extended period of instability, when even the bank struggled to provide services, no interest waivers were granted to its customers in the region. The Chamber reminded the government that while other banks curtailed their services or withdrew entirely from the valley following the onset of turmoil in 1989, J&K Bank maintained a monopoly, providing credit under stringent terms,” FCIK in a statement said.

The Chamber criticised the bank’s practices, including interest rates 4 percent to 5 percent higher than mainland banks, citing “market risk factors,” and demanding excessive security such as collateral far exceeding the loan amount and personal guarantees.

FCIK also pointed out that borrowers in the region are directly linked to depositors who generate over 89% of the bank’s total deposits—the lowest-cost funds in the sector, at 4.4%.

The Chamber highlighted that the SARFAESI Act only became applicable in Jammu and Kashmir in 2017 and that the mortgages provided to the bank were originally intended to secure funds, not to enable policies such as “name and shame” or e-auctions accessible nationwide.

FCIK insisted that the SOTS must be genuinely “special” by offering a straightforward implementation mechanism, a uniform and non-discriminatory substantial reduction of at least 30% on the principal NPA balance, and a waiver of all unapplied interest across all borrower segments.

The Chamber argued that since all businesses, irrespective of size, have suffered due to uncontrollable circumstances, the scheme should be extended to all customers in the region without loan limit restrictions. Denying benefits to any group would amount to discrimination, implying that borrowers with higher loan limits were unaffected by the adverse business environment the scheme seeks to address.

The Chamber also emphasised that collateral, including ancestral properties mortgaged under questionable conditions, should not be tied to the proposed SOTS. Such practices would unfairly penalise borrowers, contravene RBI guidelines, and deny borrowers their rightful benefits.

Drawing attention to repayment schedules, FCIK noted that the RBI has approved repayment periods of up to two years with nominal interest beyond six months in similar cases. It called for a tailored approach for Jammu and Kashmir, considering its unique challenges.

“The grant of sufficient time is essential, as borrowers need time to arrange resources, often through property sales, which can be a prolonged process,” the Chamber stated, adding that property sales remain the only viable option for many borrowers to resolve their debts.

FCIK statement reads that any One-Time Settlement (OTS) scheme lacking simplicity, uniformity, and meaningful concessions will fail to provide the necessary relief, leaving local businesses without the support needed to recover from prolonged financial strain.