J&K Bank Commitment Fees issue: As PHDCCI Jammu, FCIK, KTA, etc call for rollback, bank explains rationale

7 January 2023

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Srinagar, Jan 7: J&K Bank’s decision to charge ‘Commitment Fees’ from its commercial clients on the untilised parts of their loans has generated a considerable debate about the move, its rationale and impact on J&K’s business.

The bank’s business clients across industry, trade and commerce from Kashmir and Jammu regions have lately joined a chorus expressing their sadness about the move and demanding withdrawal of the bank’s decision to charge the ‘Commitment Fees’.

On Saturday, PHDCCI Jammu chapter chair Rahul Sahai Chair appealed Baldev Prakash, CMD J&K Bank, to revaluate the decision of imposing Commitment Charges ‘to its valuable customers.’

Senior J&K Bank officials whom Ziraat Times reached out for their comments maintain that there was a sound financial rationale for the Commitment Charges, arguing that when the bank sanctions a certain amount as loan to its customers, it cannot use that for other purposes, irrespective of whether its customers lift that loan or not.

“The banks are empowered by RBI to take such decisions if the situation so warrants. As such, there is a sound rationale in this decision”, said the senior officials, who requested not be quoted for not being authorised to speak to media.

Bank officials also said that they encourage those clients who have concerns about the matter to visit their respective bank branches to have more clarity about the rationale and the procedure of the move.

Rahul Sahai Chair PHD Chamber of Commerce & Industry Jammu Chapter while appealing the CMD Baldev Prakash to personally look into and revaluate the matter regarding the borrowers’ accounts who are using less exposures given to them.

“Because of this decision lot of good and big customers are shifting from J&K Bank to other options and J&K Bank is being trolled for wrong decisions as no other bank is charging these type of charges”, he said.

Mr Sahai also said that this step taken has created an immense displeasure amongst J&K Bank’s borrowers.

Federation Chamber of Industries Kashmir has also asked the bank to reconsider the decision.

Meanwhile on Thursday, Kashmir Traders Alliance (KTA), a grouping of Kashmir-based traders had a meeting with the management of the bank, including the bank’s General Manager of Credits, to discuss the imposition of the commitment fees.

KTA President Aijaz Shahdhar told Ziraat Times that while the meeting was held in a friendly environment, J&K Bank executives stated they cannot put off the decision to impose commitment fees; instead, they promised to make sure that they would charge less than other banks operating in J&K.”

Further, he said they were assured that for the fresh accounts opened post-June, there will be no levying of commitment charges on unused loans for the first two quarters of the financial year. Fresh accounts will also not be charged any commitment rates for the first two quarters, KTA quoted the bank officials as saying.

A number of traders and hoteliers across J&K have expressed displeasure with the bank for deducting charges on unutilized loan amount of the borrowers.

Talking to the news agency—Kashmir News Observer (KNO), Jammu Kashmir Hoteliers Club (JKHC) Chairman, Mushtaq Ahmad Chaya, said that he has received some complaints from some of the hoteliers that interests are being deducted on the unutilized amount of loan from their CC accounts.

“It is totally wrong that despite the amount remaining unutilized, the interest is levied on the consumers. It is a sort of a facility and the interest can be charged only when the amount is being utilized,” he said.

“Although I don’t personally know anything in this regard, I have received complaints from some of the hoteliers. This should not happen and I don’t think other banks are doing so,” he said.

Moreover, the trade bodies have also issued statements in this regard, appealing CMD J&K Bank Baldev Prakash to personally intervene into the matter as this has created an immense displeasure amongst the borrowers.

Kashmir Economic Alliance (KEA) chairman Mohammad Yaseen Khan in a statement said, “on one hand it was encouraging that in the last few quarters the bank has shown growth when other such financial institutions have been witnessing a fall in their assets across the south Asian region. While we appreciate our bank, in contrast J&K Bank is deducting charges on one pretext or other which we fail to understand. We are not asking for any relief, soft loans or concessions but deducting unnecessary charges is very depressing and unacceptable,” Khan said.

“Now that the Bank is in a stable position, it needs to play its role for providing solutions for revival of the economy of the UT which has always been deeply connected to and supported by the stakeholders like business community hence becomes imperative upon J&K Bank to stop debiting charges of this nature otherwise we will be forced to look for other lending options from other financial institutions of the country,” Khan observed.