J&K Bank Eyes 15% CAGR In Loan Book Over Three To Five Years

The Jammu & Kashmir Bank Ltd. projected a compound annual growth rate of 14–15% in its loan book over the next three to five years, with a 12% growth expected in the coming year.

"In case the business as usual starts happening in this union territory, then it will be more than that," Chief Executive Officer Amitava Chatterjee said in a conversation with NDTV Profit on Tuesday, referring to the potential economic disruption due to the Pahalgam terror attack.

"So, 12% considering that there will be some moderate business activities in this state. In the long term, three to five years, I expect a CAGR of close to 14–15%," he added.

He explained that the bank's direct loan exposure to the tourism sector was minimal, which is around 1% of its total loan portfolio.

Past disruptions did not impact the private sector lender's operations significantly. While indirect effects on other sectors tied to tourism are expected, they remain difficult to quantify, according to the CEO.

"Historically, we have had such situations in the past, which have not affected the bank much. The stress was somewhere around 2–3% of the tourism portfolio.

"So, I do not see much of a problem directly. As far as the indirect impact is concerned, yes, tourism almost contributes 10% of the GDP of the state," Chatterjee added.

Outlining that there has been a drop in tourist activity recently, he is hopeful of the upcoming Amarnath Yatra to help in the recovery of the tourism sector and overall economic activities in the Kashmir valley.

On deposits, he expressed confidence, citing that 88% of retail deposits come from the region, where the bank holds a 60% market share, minimising potential risks. "Even if there is an impact, I don't think it will be much because in the past, this has not affected the loan book."

Chatterjee also emphasised that diversification was a priority, but this does not mean that the bank would halt its business activities in the UT. "The support to the economy of Jammu and Kashmir will continue, but diversification will continue to mitigate the concentration risk," he explained, adding that the bank was already present in 20 other locations across India.

When asked about the impact of the Reserve Bank of India's rate cut policies, the CEO said the bank successfully maintained its 2024 margin, largely due to a strong CASA ratio. However, with a 50-basis-point rate cut already in place and more expected, margin pressure is anticipated.

"We expect some pressure on the margins going forward because the rates have been cut by 50 bps and we anticipate further rate cuts. This will put pressure on both lending and deposit rates," he said. "I would be happy with CASA above 3.7%, but I do not expect it to continue at 4%."