Kashmir Industry Body Urges Govt to Step In for One-Time Relief to Stressed MSMEs | Kashmir Life

SRINAGAR: The Federation of Chambers of Industries Kashmir (FCIK) has renewed its demand for urgent intervention by the Government of Jammu and Kashmir to enable a one-time, structured and humane resolution of Non-Performing Assets (NPAs) and stressed accounts of Micro, Small and Medium Enterprises (MSMEs), arguing that most businesses were pushed into distress by circumstances beyond the control of entrepreneurs.

In a detailed representation, FCIK said the industrial credit ecosystem in Jammu and Kashmir has remained severely constrained since 1989, when the majority of the 47 banks and financial institutions operating in the region either shut down or drastically curtailed operations. This left J&K Bank as the primary source of institutional finance, creating what the Federation described as a near-monopolistic credit environment.

According to FCIK, this resulted in MSMEs being charged interest rates 3–5 per cent higher than national averages, subjected to rigid collateral requirements, and operating under an abnormally low credit-deposit ratio. These structural disadvantages, the Federation said, compounded the impact of decades of instability, frequent lockdowns, delayed government payments, natural calamities and prolonged economic disruption.

While acknowledging a visible shift under the current leadership of Jammu and Kashmir Bank away from the earlier “name and shame” approach, FCIK expressed concern that recovery actions under the SARFAESI Act—including e-auction notices—continue to be published regularly in local newspapers. Such actions, it said, inflict social stigma, psychological stress and reputational damage on entrepreneurs whose defaults were largely involuntary.

The Federation recalled that after assuming charge, the Managing Director of J&K Bank had assured FCIK of a durable solution, including a Special One-Time Settlement (SOTS) scheme and strict adherence to the RBI’s Framework for Revival and Restructuring of MSME Accounts, as well as Government of India guidelines. These guidelines, FCIK pointed out, have been held by the Supreme Court to be mandatory before declaring MSME accounts as NPAs.

FCIK also referred to the high-level committee constituted by the UT Government under the chairmanship of the Principal Secretary, Finance Department, with the Commissioner/Secretary Industries & Commerce and the Executive Director of J&K Bank as members. The committee was tasked with devising a comprehensive solution to the chronic NPA problem. However, the Federation noted that the panel has yet to produce tangible outcomes, even as coercive recovery measures continue on the ground.

The Federation argued that the automatic classification of MSME accounts as NPAs after a delay of three instalments, followed by action under Sections 13(2) and 13(4) of the SARFAESI Act, is economically unrealistic and administratively unjust. MSMEs, it said, invest both borrowed funds and personal capital in fixed assets, machinery and raw material, making immediate recovery of funds locked in such assets impractical.

With both the UT Government and J&K Bank now appearing aligned on resolving the NPA backlog through a Special OTS and allied measures, FCIK demanded an immediate moratorium on coercive actions. This includes SARFAESI notices, e-auctions, sealing of industrial units, filing of recovery suits and the engagement of recovery agents. The Federation stressed that settlement mechanisms must precede enforcement, not follow it, to avoid unnecessary litigation, mental distress and preventable business closures.

FCIK said it would ensure full compliance and settlement by MSMEs under its fold if the Bank adopts a cooperative, fair and non-discriminatory framework. Such a settlement, it argued, would unlock substantial funds currently blocked in NPAs for the Bank while allowing stressed enterprises a dignified exit from legacy debt, even if that entails liquidation of personal assets.

The Federation categorically opposed linking SOTS to mortgage values, noting that MSMEs in Jammu and Kashmir were historically compelled to mortgage ancestral homes and personal properties multiple times due to the lack of alternative credit options. Excessive collateralisation, it said, cannot now be used as a punitive recovery tool.

FCIK further emphasised that higher interest rates charged to J&K MSMEs during turbulent years—ostensibly to cover “market risk”—must be factored into any settlement. Principal haircuts, it said, should be aligned with the average concessions granted to enterprises outside the region under various settlement mechanisms over the past decade.

“The resolution of legacy NPAs is not just a banking issue but an economic and social imperative,” the Federation said, urging the UT Government to act decisively in its capacity as a major stakeholder in J&K Bank.