imageA news article at GreaterKashmir has accused J&K Bank of “Evergreening” NPAs.

They have, it seems, not recognized potential defaults even though they are past the 90 day limit for interest/principal repayments, and in some cases, have further lent money to help them pay back their dues.

Among the three big loan accounts which, according to sources, are technically unsecured and non-performing assets include Rs 650 crore given to a Kolkatta-based company engaged in agro and ancillary business. The company’s accounts have been declared NPA by all other banks while the J&K Bank continues to show it as a standard loan. A bank outside J&K has filed a winding up petition against the company for non-payments of Rs 224 crore outstanding dues.

J&K Bank’s loan to this company, sources said, is unsecured and is a fit case for “forensic audit.” The bank has also treated it as “priority sector” to meet the regulatory requirements. “A few members of the Bank’s Board of Directors are making desperate efforts to give the company a Stand By Letter of Credit (SBLC), an
instrument recently banned by the RBI, to show it as a normal account,” sources said.

In another instance, a real estate company of Mumbai has taken Rs 400 crore from J&K Bank and the cheques which the bank has purchased from the firm have bounced more than once. Another Bangalore-based Communication Company, whose promoter has been arrested for fraud, still continues to be a standard asset in the books of the J&K Bank.

A Hyderabad-based company has defaulted on its interest payment. Pertinently, within three months of J&K Bank advancing Rs 100 crore, the company failed to meet the obligations of keeping the account standard. Surprisingly, the bank gave more money to it to service its debt obligations, sources said.

The Auditors while scrutinizing the loan accounts of borrowers outside J&K have found ‘shocking’ transactions in scores of such accounts, revealing the “clandestine” intent of the loan sanctioning and disbursing authorities.

Sources said such ‘technically unsecured and non-performing’ loan totals to around Rs 2500 crore.

This is quite serious, because (Source) after accounting for restructuring of Rs. 1,500 cr. and the existing Rs. 750 cr. Gross NPAs, the actual NPA situation may be quite high. The article calculates it at 4,000 cr. which is a huge 8.5% of their advances (of Rs. 47,000 cr.).

This is only marginally better than the United Bank of India case which currently has 10% of advances as NPAs.

The stock is down 19% at 1490.

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It’s had a good run since April, climbing more than 20%. All that, gone, in a single day.

The troubles of the banking system are slowly emerging. The RBI should be vigilant and force banks to write down assets immediately, and order immediate audits.

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