SRINAGAR: The Federation of Chambers of Industries Kashmir (FCIK) has reiterated its long-standing demand for urgent intervention by the Government of Jammu and Kashmir to facilitate a one-time, structured and humane resolution of Non-Performing Assets (NPAs) and stressed accounts of sick Micro, Small and Medium Enterprises (MSMEs), stating that most units have slipped into distress due to circumstances beyond the control of entrepreneurs.
In a statement to Ziraat Times, FCIK said that credit flow to the industrial sector in Jammu and Kashmir has remained severely constrained since 1989, when most of the 47 banks and financial institutions operating in the region either closed down or curtailed operations. This left Jammu and Kashmir Bank as the primary source of institutional credit, creating what the Federation described as a near-monopolistic situation marked by interest rates 3–5 per cent higher than pan-India averages, rigid collateral requirements and an abnormally low credit-deposit ratio for MSMEs.
While acknowledging a visible shift away from the earlier “name and shame” recovery policy under the current leadership of J&K Bank, FCIK expressed concern that SARFAESI notices and e-auction advertisements continue to appear regularly in local newspapers. The Federation said such actions cause social stigma, psychological stress and reputational damage to entrepreneurs who defaulted due to prolonged instability, lockdowns, delayed government payments, natural calamities and economic disruptions spanning more than three decades.
The Federation recalled that the Managing Director of J&K Bank, after assuming charge, had assured it of a concrete and durable resolution to the NPA problem, including the launch of a Special One-Time Settlement (SOTS) scheme and strict adherence to the RBI Framework for Revival and Restructuring of MSME Accounts, as well as Government of India guidelines. These guidelines, FCIK noted, have been held mandatory by the Supreme Court before declaring MSME accounts as NPAs.
FCIK further pointed out that the UT government had constituted a high-level committee under the chairmanship of the Principal Secretary, Finance Department, with the Commissioner/Secretary Industries and Commerce and the Executive Director of J&K Bank as members, to devise a solution to the chronic NPA issue. However, the Federation expressed concern that the committee has yet to deliver tangible outcomes, even as coercive recovery measures continue on the ground.
The Federation argued that a mere delay of three instalments should not automatically result in MSME accounts being classified as NPAs, followed by action under Sections 13(2) and 13(4) of the SARFAESI Act. It said enterprises invest both borrowed funds and personal capital in fixed assets, machinery and raw material, making immediate recovery demands economically unrealistic and administratively unjust.
Stating that both the government and J&K Bank now appear aligned on resolving the NPA backlog through a Special OTS and other measures, FCIK demanded an immediate moratorium on coercive actions, including SARFAESI notices, e-auctions, sealing of industrial units, filing of recovery suits and engagement of recovery agents. The Federation stressed that the settlement scheme must precede enforcement action to prevent avoidable litigation, mental distress and business closures.
FCIK assured that MSMEs under its fold would fully comply with and settle their liabilities if the bank adopts a cooperative approach and the settlement framework is fair, uniform and non-discriminatory. It said such a settlement would help unlock substantial funds currently stuck in NPAs for the bank while offering stressed enterprises a dignified exit from legacy debt, even if liquidation of personal assets becomes necessary.
The Federation also asserted that the Special OTS should not be linked to mortgage value, noting that MSMEs were historically compelled to mortgage ancestral homes and personal properties multiple times due to lack of alternative credit options in the post-1989 period. Excessive collateralisation, it said, should not now be used as a punitive recovery tool.
Highlighting that MSMEs in Jammu and Kashmir were already burdened with interest rates significantly higher than national averages during years of turbulence, FCIK said these factors must be taken into account while determining principal haircuts. It added that concessions should be aligned with the average relief granted to enterprises outside the region under various settlement mechanisms over the past decade.
