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for the low NPA is captured in the data of the bank’s advances, or lending. Until June 2013, 56 percent of advances were in agriculture if one looks at an all-India level. Outside the state this is a mammoth 83 percent. In the state, agriculture trails personal loans (32 percent) by 12 percent. Basically, J&K Bank does not lend to the kind of high-risk infrastructure and real estate projects that cause big holes in the balance sheets of most banks. It is one of the few banks that even managed to recover most of its money lent to the defunct airline Kingfisher. “We sold pledged shares as soon as the United Breweries and Diageo deal was announced and managed to recover back more than 90 percent of the 100 crores lent back,” says Shafat Ahmad Banday, president (advances and asset planning) at the bank.
    To understand the J&K Bank, which has grown from 280 branches to 777 branches and whose net profit rose from Rs 1.48 crores to more than Rs 1,100 crores between 1989 and 2014 (with deposits of more than Rs 69,000 crores for the year ending in March 2014), you need to understand its unique place in a troubled valley that has seen terrorist attacks from separatists for two decades in which around 50,000 people have died according to government statistics. And yet, during the decade of the worst militant attacks, between 1989 and 1999 (the year when India and Pakistan fought a war over Kashmir in the mountains of Kargil), the bank grew its net profit to Rs 85 crores from just over one crore as 67 new branches were added. It’s an institution that grew rapidly during some of the most violent years in the Himalayan valley. It is an institution that veers between wanting to reach out into India, and even outside India, and wanting to retain monopoly business in the valley. As the main lender to most budding enterprises, it is perhaps the most vital cog in the green shoots of entrepreneurship that Kashmir has seen over the last one and a half years. It is perhaps the only bank in India that customers constantly refer to as “our bank.” In Kashmiri business, J&K Bank is the only really big success story. It has no real state-owned competitor of similar size, and even the closest private businesses have a turnover of an average of only around a couple of hundred crores.
    Analysts’ reports endorse the bank’s performance. “J&K Bank’s credit growth is expected to outpace the industry while maintaining a (higher than competitors’) NIM (net interest margin) of 4.1–4.3%. We maintain a ‘buy’ rating on the stock,” says an ICICI Securities report.
    J&K Bank’s nearest national rivals, such as Canara Bank (deposits of around Rs 71,000 crores), have NIMs of around 2.3 percent.
    Brokerage firm Anand Rathi in a recent report pointed to the fact that gross NPA of the bank grew 6.5 percent quarter on quarter with fresh slippage of only 1.2 percent of loans or “lower than that reported by most banks in 2QFY14,” and with NPA coverage of 89.1 percent or “highest of its peers,” the bank gets a “buy” rating. Says Vaibhav Agarwal, vice president, research (banking), of Angel Broking: “The stock is trading … at a higher end compared to peers, which factors in its better asset quality performance vis-à-vis peers even in a challenging macro environment.” 4
    In a curious turn of events, if you look at the history of the bank, which started when Kashmir was still the princely state of Kashmir, the only Muslim majority state in British India with a Hindu ruler, it’s possible that the militancy was the best thing that could have happened to the bank. (Though of course in troubled Kashmir no one quite puts it like that.)
    Hari Singh, the ruler who dreamed up the bank in 1930 (it was finally started in 1938), wanted a financial institution of his own partly because his landlocked mountain state had little service from the big banks of the