Tell me what you

want to be when
you grow up

Tell me about
your leaky boat

Tell me about your

plans and your pains

Tell me what I can

do for you
I am listening
Annual Report 2007–08
 I am listening…
Over the last seventy years the people of Jammu and
Kashmir have invested their emotions in J&K Bank.
While we have never faltered in giving them outstand-
ing returns on equity, we may not have done quite
as well on the emotional coefficient.
Besides doing ethical and socially relevant
business and making profits for them, and ourselves,
we are moving towards being an institution that feels
for its stakeholders.
We have so far communicated with our
constituents. Now we want to have a dialogue; a
conversation with our customers. Listen to them.
Not just about banking but about them and their
Contents concerns. Real people, real day-to-day issues. People
02 Productisation of Financial Services are to be at the centre of the new improved J&K Bank.
04 Apple
06 Dastakaar
Today, we see a flicker of hope in the state. We
08 Agriculture want to play a role in converting it into fulfilment;
10 Khatamband
the new optimism has to be converted into an
12 Zafran
14 Trump Card opportunity; promises have to become performance
16 Chairman’s Statement and cynicism has to give way to confidence. Only then
19 Board of Directors
21 Executive Committee
the issues confronting society and our economy will
22 Happy Kashmir get addressed.
25 Financial 2007-08
28 Directors’ Report
Before we aspire, as an institution, to lead, we
26 Management Discussion & Analysis have to learn to serve. We have to listen, in order to
34 Auditors’ Report
be heard. We have to understand, before we can act.
35 Balance Sheet
36 Profit & Loss Account We have to empathise, before we suggest
37 Schedules to Balance Sheet In all this, symbolism is the substance. J&K Bank
43 Schedules to Profit & Loss Account
44 Principal Accounting Policies
seeks to symbolise a wider and deeper change in our
46 Notes on Accounts attitude to our work, to our fellow citizens and to our
58 Cash Flow Statement
59 Comments of C & AG
state and the nation. We have to collectively change
60 Report on Corporate Governance lives and individually change society.

08070xxx_01_25.indd 1 7/16/08 3:28:55 PM

 PRODUCT PROFILE

Productisation of Financial Sevices

P
Capitalizing on the momentum generated by renewed business
strategy adopted by our bank, we have moved far ahead of
showcasing only the vanilla product offerings. An institutional
process for productisation of all our financial services has been
initiated. Customising every financial product in accordance with
tthe business scope, market needs while keeping in view
tthe mindset of our customer base; we are trying to place the
productisation process in the larger socio-economic context of
diverse economy like that of ours.
Agriculture, horticulture (especially apple), handicrafts,
ttourism, saffron etc. are the forte of J&K economy. Keeping this
in view, we have, so far designed a specialized offerings bouquet
tthat contains economy-specific products like All Purpose
Agri-term Loan, Apple Advance Scheme, Dastakar Finance, Craft
A
Development Finance, Saffron scheme and Giri Finance etc.
Given the extent of peoples’ involvement in various sectors
of economy and the volume of business in monetary terms, J&K
Bank has all along been alive to the needs and the requirements
of the grass root level growers, artisans, craftsmen etc. With a
strong commitment towards the empowerment of J&K people
tthe bank is making efforts to broaden and deepen its financial
servicing areas through its customized product process, whereof
everyone can participate in the development of J&K economy
besides feeling empowered and becoming self-reliant.

02 J & K BA N K A N N UA L R EP O R T 20 07– 0 8

08070xxx_01_25.indd 2 7/16/08 3:28:55 PM

08070xxx_01_25.indd 3 7/16/08 3:28:56 PM
 Apple Apple Advance Scheme
POSITION
Apple, the king of Kashmir fruit, lies at the heart
of horticultural economy of J&K state. Every year
hundreds of truckloads of apple reach the markets of
Delhi, Punjab, Jaipur, Bangalore, Chennai and
Ahmedabad. The potential yearly returns on the fruit,
as per some of the findings, stand at somewhere
between Rs 2000 to 2500 crores. Almost 2.5 million
people of the state are directly or indirectly associated
with the apple business.
04 J & K BA N K A N N UA L R EP O R T 20 07– 0 8
08070xxx_01_25.indd 4
PROBLEM
It is a matter of fact that the horticuture
especially apple business has a great
potential. The enormous potential of this
sector has not been leveraged due to the
gross under-financing by the banks. This
had provided the space for the middlemen,
locally known as Aritees, to create a vicious
system of exploiting the needs of small and
medium sized fruit growers.
These Aritees charge hefty rates of
return plus commission against the money
provided in advance to the small fruit
growers. The growers, being indebted, are
forced to sell their produce through these
Aritees only thereby reducing their
bargaining power and ultimately their
profits. This halts the trickledown effect
of the fruit economy. In absence of any
financial backing these farmers used to get
their input materials like fertilizers and
fungicides on credit that raised the costs
and squeeze their margins further.
7/16/08 3:28:57 PM
 PRODUCT
J&K Bank’s specially designed product
named as Apple Advance has struck at the
root of this exploitative system that thrived
on scant or untimely fund availability
and at times even lack of finance through
formal channels.
Last year, after a detailed study of
the apple economy, a need-based, time-
specific product was introduced. The
product incorporated all the critical
inputs necessary to make our financial
intervention effective and grower-friendly.
Apple Advance was introduced to meet
the comprehensive requirements of the
apple growers with distinctive features like
reduced margins, higher scale of finance
that includes production and post harvest
maintenance, auto renewal of limits and
most importantly very easy and hassle free
documentation. With an effective product
monitoring mechanism in place, the scale
of finance was increased from Rs 1.50 lacs
per acre from Rs 40,000 per acre. Regular
revsion of scales of finance is carried out
to match the rising production and
marketing costs.
PROCESS
The objectives that guided the
customization of the product included
the easy access, simplified documentation,
`avoiding redundancies, shortened process
time and flexible fund limit. Even for the
growers who have just leased orchards
can avail finance under the scheme.
With hypothecation of fruit crop and
Third Party Guarantee of 2 persons as
security and no emphasis on collaterals,
the borrower is also allowed drawals up to
50% of the previous years limit till the bank
renews the sanction for the next year.
The process has been made extremely
easy and hassle free to ensure that
comprehensive requirements of Apple
growers to take care of Production &
Marketing Costs are fulfilled adequately
and in time. Simplified legal documenta-
tion has been made to expedite the loan
processing.
08070xxx_01_25.indd 5
PERSON
Nazir Ahmed Dar, 42, of Seer Jageer
Sopore a small apple grower, whose
annual fruit returns would just suffice
for his basic needs is a beneficiary of this
grower-friendly product pf the bank. Just
few years back he couldn’t think of owning
a vehicle to carry fruits to outside markets
but now he not only saves money but also
has created many assets of his own.
“We have become self-reliant in just
one year. We are no more anxious about
the market prices in Delhi or any other
fruit Mandi (market) outside because we
are not their debtors this time. Now, we
sell our produce once we get convinced
about the rates”, says Nazir Ahmed Dar,
42 of Seer Jageer, Sopore. J&K Bank has
freed us from the financial bondage that
had restricted not only our growth but
also the development of fruit industry of
our state, he adds.
Mohammad Ramzan Mir, 47 of Sopore
says that his profits have almost doubled
in just one year after availing the Apple
Advance loan from the bank. “Those
exploiter Aritees would charge us 20% as
their commission which we have saved,
thanks to bank’s effective intervention.
Even in purchase of fertilizers, fungicides
and other pesticides we have been able to
save 10 to 20% due to cash payments. We
feel confident enough now to grow and
dream further, ” he said.
PERFORMANCE
Just a year after the product was introduced
and marketed in the apple growing belts
across J&K the results have been encourag-
ing so far. Thousands of loan cases have
been processed and the funds disbursed
across J&K.
The streaks of confidence galore on
faces of the beneficiaries are representative
of the growers’ satisfaction and bring alive
the bank’s motto of serving-to-empower.
This very well sums up the response to our
product so far.
The objectives of the product were
realized as it had been tailored to empower
and then to emancipate every small and big
apple grower from the vicious network of
non-banking intermediaries by reaching
out to them with affordable, easy and really
fruitful product. And the goal of such a
socio-economic revolution that is silent but
spread across the state is certainly the apple
of our organizational-eye.
J & K BA N K A N N UA L R EP O R T 20 07– 0 8 05
7/16/08 3:28:59 PM
 Dastakar
J&K Bank Dastakar Finance

POSITION
The handicrafts of Kashmir have always been a
source of pride for its people. These famed works
of art have throughout history surpassed the
barriers imposed by geography.
Among all these versatile crafts, carpet
weaving and shawl-making stand distinctively out
both in terms of exquisite craftsmanship and
business volume.
Handicraft and handloom sectors comprise a
major industrial activity in the state. Among the
oldest industries of Kashmir, they support more
than five lac people with an annual turnover of
Rs. 2,000 crores.

PROBLEM
However, artisans, craftsmen, and
weavers have never been the real
beneficiaries of the trade. Lack of capital
and their weak socio-economic
condition makes them vulnerable to
exploitation by traders and middlemen
or simply a moneylender, putting them
at the mercy of these informal
channels of finance. The cost of finance,
in essence, far outweighs the gains
accrued. The artisans are bound by
the harsh terms and conditions of the
middlemen and end up bowing to
their demands.
With the result, a large number of
these craftsmen have shifted to unskilled
labour bringing this traditional industry
to a decline.

06 J & K BA N K A N N UA L R EP O R T 20 07– 0 8

08070xxx_01_25.indd 6 7/16/08 3:28:59 PM

 PRODUCT
J&K Bank in its endeavour to promote
trade, industry and to preserve the
traditional arts and crafts of the state
devised a scheme aimed at the financial
needs of the artisan community aptly
called ‘JK Bank Dastkaar Finance’. The
scheme provides easy and soft credit
to craftsmen engaged in the trade and
helps them to set up their own ventures,
weeding out the middlemen responsible
for their exploitation. Keeping in view
the specific production cycle associated
with this trade the loan comprises of
a term loan and working capital
components.
PROCESS
The disbursement is phased in quarterly
installments and aligned to the status
of WIP (work in Progress). This ensures
proper end use, quality control and
timely completion of work. The weavers/
artisans are allowed a reasonable time
for the repayment of the bank finance.
To make the credit hassle free, no
collateral/third party guarantee is
required. The product has been designed
on the bank’s philosophy of confidence-
based lending as opposed to collateral-
based lending. There is no requirement
of any collateral security under this
product. The legal documentation has
been kept at bare minimum with only
two documents to be executed for
disbursement of the loan.
In order to increase the reach of this
product the database of the weavers/
artisans available with various trade
associations is being utilized besides
identification of people by concerned
branches of the bank.
08070xxx_01_25.indd 7
PERSON
Abdul Qayoom Mir of Hamichi,
Saidpora is a happy man these days.
Smiling he says “Free from the clutches
of the middlemen I no longer work for
anyone but myself. It is all because of the
finance I took from J&K Bank, as hassle
free and timely finance helped me save
time and earn better margins.” Qayoom
says he earns more now because of the
Dastakar scheme. With a glint in his
eyes he dreams loudly about giving his
children a better education and life.
A fellow artisan Manzoor Ahmad
Mir says that earlier he couldn’t
negotiate the price of a shawl he had
prepared. “As I had already borrowed
from the middleman, he would find
faults to lower the price further besides
the agreed commission. I had no option
but either to compromise on price or
go for a distress sale. Either way I
would lose.”
After availing the finance he proudly
says that he can sell his product to the
highest bidder thus earning maximum
profits.
The artisans are happy as they see
an end to the exploitation, which was
gradually forcing them out of the
trade itself.
PERFORMANCE
Hamichi, Saidpora is a village comprising
of more than 200 families, all of whom
are engaged in Sozni embroidery. They
were completely unbanked until almost
all of them availed the loans under
Dastkaar Finance. The Zakura branch
of J&K Bank in the city suburbs has
disbursed 108 cases of Dastakar Finance
in one go while 80 cases are under
process.
The people of this small village are
talking about saving, getting a loan,
installments, interest, profits- terms
unknown to them earlier. The awareness
has also resulted to an awakening of a
kind. They are waking up to their needs
to make a collaborative effort for
common benefits. Like sensing a need
for a market the artisans of the village
have made a joint effort to form a group
to market their finished goods.
The change does not only reflect in
their tone but in their lives as well, as
they are all set to move towards an
empowered and bright future that
awaits them.
J & K BA N K A N N UA L R EP O R T 20 07– 0 8 07
7/16/08 3:29:01 PM
 Agriculture J&K Bank All-Purpose Agri Term Loan
POSITION
Agriculture not only gives riches to a nation, but the
only riches she can call her own. Rightly said. Agrarian
economy is also the most important component of J&K’s
financial system. Thus, agricultural farming including
the lucrative horticulture sector and the related business
practices, engage 65% to 70% of the state population.
Considerably large workforce, both semi-skilled and
un-skilled gets employment in this growing sector.
08 J & K BA N K A N N UA L R EP O R T 20 07– 0 8
08070xxx_01_25.indd 8
PROBLEM
The small farmers, who constitute the
backbone of this agro-based economy,
have had many problems because of
being marginalised. Although, this group
plays major role in the productivity
but has all along been suffering due
to lack of finances for the cultivation,
harvesting and marketing of their crop.
It may be said that the institutional
mechanism of credit in rural areas had
not been able to deliver.
7/16/08 3:29:02 PM
 PRODUCT: JK BANK ALL-
PURPOSE AGRI TERM LOAN
The product aptly named as All-Purpose
Agri Term Loan has been designed in a
way that lays special emphasis on small
and marginal farmers and provide
sufficient and, more importantly, timely
finances to the farmers engaged in all
types of agricultural and allied activities.
The product aims to cater to the needs of
small farmers within very little land
holdings in the rural and semi-urban
areas of the state.
PROCESS
The objective has been to provide easy
finance to needy farmers through
regular channels of finance and to
wean them away from the exploitative
circle created by the non-banking
intermediaries. For that purpose, the
product has been devised in such a way
that hitherto un-banked customers
get an easy access to banking services
through simple and affordable
documentation process. A maximum
credit of Rs 1.00 Lakh, depending upon
the agri-activity to be financed is
provided but multiple activities can also
be considered for finance. The product is
offered at affordable interest rates.
08070xxx_01_25.indd 9
PERSON
This finance, which provides up to
Rupees 1 lakh, has benefited small fruit
and vegetable growers effectively. It
has helped them to have major share
of their earnings. There are number of
beneficiaries, who have had a chance to
improve their lives and their life-style.
Farooq Ahmed Lone of Batwina
Ganderbal gladly feels that he is one
of the privileged ones, to have had
availed this finance.
He is happy to have escaped the
shackles of traditional lending system,
“The middlemen eyed most of our profit
in return for the money we borrowed
from them.” He is satisfied with this
J&K Bank endeavor to help them have a
dignified living. Now growers like him
are able to send their produce directly
into Mandi or at times outside the state.
His fellow farmer, who also encashed this
opportunity, have similar sweet tales of
success to tell. Such stories can be heard
everywhere in surrounding villages like
Zazna, Ahan and Nawab-Bagh. For them,
the entire process has been simple. Lone
admits, “Things like buying of seeds,
pesticides and other requirements have
been eased out and we get them at much
concessional rates now, all because we
have the money with us. We feel more
independent now”.
PERFORMANCE
In December 2006, in just two sittings
with the villagers, the Ganderbal Branch
disbursed Rupees Eighty five lakh at the
doorsteps of ninety borrowers with
minimal formalities. As of now, this
branch has disbursed almost 4 Crores
to more than 400 vegetable growers and
none of the monthly installments in
these cases are in arrears.
This product is available for farmers
of cereal Crops and vegetables,
orchardists. it is also available to
unemployed rural youth for setting up
of small Dairy/Poultry units, in purchase
of seeds, pesticides/fertilizers, plough
animals and farm Machinery. This seems
just the beginning, as the fruits of this
harvest are expected to yield much. The
strengths of being a community bank
with a monopolistic presence are being
exploited more effectively so that the
product reaches all the small-growers
of the state. And with every loan
granted, we are having more and
more happy faces.
J & K BA N K A N N UA L R EP O R T 20 07– 0 8 09
7/16/08 3:29:03 PM
 Khatamband
J&K Bank Khatamband Finance
POSITION
Introduced in Kashmir by the 14th century Muslim saint
from Persia, Shah-i-Hamdaan, Khatamband is an art of
designing ceilings with beautiful geometric fitted-in wooden
patterns. These ingenious patterns are made of soft pine
wood called fir or Budhloo in Kashmiri. It gained
popularity for its exquisite beauty and more so for its
insulation property, which was essential, given the climatic
conditions of this place.
The uniqueness of this art lies in the fact that
Khatamband ceilings can be dissembled and re-assembled
conveniently as per the requirements. It adds an ornamental
look to the already magnificent architectures. There are
hundreds of designs for the Khatamband wherein artists
also experiment with mirrors and colours.
The houseboats in Dal Lake stand witness to the
magnificence of this craft that attracts every eye around and
wins over the aesthetic senses of every visitor. Presently,
about ten thousand artisans are associated with it.
Now this art is even traveling to places like USA,
Australia and many European countries as the local artisans
are increasingly getting orders from foreigners.
10 J & K BA N K A N N UA L R EP O R T 20 07– 0 8
08070xxx_01_25.indd 10
PROBLEM
They say, “The hands that decorated the
abodes of the richest remained empty”.
Despite having such a great potential
in the interiors industry, this
handicraft faces challenges at
various fronts. The biggest being the lack
of requisite and timely finances. With
prices of the required timber rising, the
craftsmen receive only 10 percent of the
advances for the order they get; whileas
the rest of payments are made only after
the completion of the work.
With the result, the coming
generations of these people, especially
the poor ones are losing interest in this
ingenious craft. The children of the
existing craftsmen are hesitant to adopt
it as a profession.
PRODUCT
Khatamband craft is a specialized
craft that provides employment to few
thousand people. A special product was
customized according to the needs of
the Khatamband craftsmen. The product
was tailored to provide comprehensive
and timely credit to them, based on
proper understanding of the production
cycle and need for finance at its different
stages.
The finance is provided as a revolving
facility, eligible for enhancement every
year on the basis on the turn-over.
7/16/08 3:29:03 PM
 PROCESS
The product has been intentionally
targeted at craftsmen aged between
18-55 years, no collateral security is
asked for and the documentation
process has been kept simple. The
prospective borrowers have to only
submit their identity proofs to avail
the facility.
08070xxx_01_25.indd 11
PERSON PERFORMANCE
Mohammad Ismail Najar (61) of Cherari The response to Khatamband Finance
Nambal, Safakadal, a frail old man, is so far, has been impressive. It has again
a Khatamband craftsman. The art has generated hope among the traditional
descended to him and Ismail’s three sons Khatamband craftsmen, especially small
are carrying it forward. ones. Access to affordable finance is no
Ismail got a time-bound order longer a problem for them. Kindling
worth Rs 80000 with an advance such hope is the first successful step
payment of just Rs 10,000. He availed towards the revival of all such culturally
finances from the bank’s Safakadal rich arts and crafts.
branch and only then was able to
complete the order in time.
“We earned good money after we
availed the loan under Khatamband
Finance Scheme. It helped us to be
independent and we could purchase
the in-put materials against cash, which
saved us at least 5 percent”, says Ismail
with a smile of satisfied.
J & K BA N K A N N UA L R EP O R T 20 07– 0 8 11
7/16/08 3:29:05 PM
 Zafran J&K Bank Zafran Finance

POSITION
Kashmiri Saffron – the most expensive spice in the world –
has a unique aroma and flavour. It is considered worlds best
because of its scientifically proven superior quality, hence
commanding a price much higher than the saffron from any
other part of the world.
Saffron is extensively used for culinary and colouring
purposes. Besides, because of its medicinal qualities, it is an
important ingredient for both traditional (Ayurvedic and
Unani) and allopathic medicines. Its demand in the markets,
both domestic and international, is growing.
Saffron is a niche-economy, involving hundreds of
Kashmiri families. Still, the recent decline in saffron
production is going to affect this segment of state economy.
In 2003-04, around 6.98 metric tonne of saffron was
exported while as the exports declined to 5.19 metric
tonne in 2004-05.

PROBLEM
Although, saffron is considered a very
profitable cash crop, the middlemen
have plagued its trade, resulting in
uneven distribution of returns. With
the farmers being at the lowest rung of
the ladder, the returns on saffron hardly
trickle down to them. These middlemen
provide advances to farmers at
exorbitant rates, thus suck them into
a vicious cycle of exploitation.
Farmers need timely finance for
saffron bulbs, fertilizers, fungicides,
pesticides, irrigation, harvesting and
packaging besides other associated
activities. Improper cultivation practices
as well as post harvest techniques for
want of finance have also badly affected
the quality of saffron.

12 J & K BA N K A N N UA L R EP O R T 20 07– 0 8

08070xxx_01_25.indd 12 7/16/08 3:29:07 PM

 PRODUCT
With a view of preserving this prized
spice, J&K Bank tailored a specific
product named JK Bank Zafran Finance.
Its purpose is to provide adequate,
timely and need-based finance to
saffron growers.
The scheme is for all saffron
growers, especially the smaller and
marginal ones including even the
contract farmers engaging in or
intending to start its cultivation. The
quantum of finance is proportionate to
the land holding of a grower. The
product also provides an additional
finance for post harvest and packaging.
PROCESS
The disbursement is done in two
phases; 60% in the first year and 40%
in the second, when the growers are in
need of funds.
The repayment of the advance is
scheduled within the four year growing
cycle of saffron. Re-financing facility
can be availed for fresh plantation of
the crop. The documentation has been
simplified and kept minimum to make
it hassle-free.
08070xxx_01_25.indd 13
PERSON PERFORMANCE
Mohammad Shaban, 60, a native of Zafran finance has made the
Pampore, has an emotional attachment middlemen and other informal channels
with the Saffron land he inherited from of finance unattractive for the saffron
his parents. “Previously, I had to lease growers. Besides it has encouraged the
out the land to a saffron grower for just small growers to withstand the price
peanuts, as I didn’t have any money to fluctuations because now they are not
invest. After availing the Zafran Finance forced to sell their produce and they can
I am getting much better returns ”, says wait till they are satisfied with the rates.
Shaban, who was thinking of disposing With the much-needed direct finance
off the land earlier but changed his mind leading to the prosperity of some, others
after availing the Zafran Finance. have already made up their mind to
“We are mostly dependent on follow. Hence the product is in demand
rainfall. The amount and timing of rain across the saffron belts of the valley.
decides the fate of a harvest. This has
been going on since long. Now, with the
decrease in rainfall, things are chang-
ing. Only a few affluent farmers have
been able to dig bore wells but with
Zafran Finance it becomes easier,” says
an 80-year-old saffron grower Ghulam
Mohammad who has dug a bore well
after availing the facility. He is hopeful
of reaping rich dividends as experts say
that proper irrigation can increase the
production by upto 50 per cent.
Another grower Mir Ramzan Ahmad
used to borrow money from a saffron
trader, who would then buy his produce.
“I was bound to sell the produce to him
only, even when he always paid me less
than the market price. Besides, he would
force me to sell specially when the prices
were low. I had to bear this double loss
every year” says Ramzan who after
availing Zafran Finance waits for the
right time to sell his produce so that he
earns maximum profits. “I am definitely
earning more but I want to grow
further”, he adds.
J & K BA N K A N N UA L R EP O R T 20 07– 0 8 13
7/16/08 3:29:09 PM
 Trump Card J&K Bank Ration Card
L AY I N G T H E F O U N D AT I O N
Deepening of financial intermediation is
a pre-requisite for sustained economic
growth. We, at the bank, have given a new
meaning to Inclusive Growth by working
on empowering people and demonstrating
that people with lesser means can be
reached and reached profitably. For us,
making a difference in people’s lives
and making profits cannot be mutually
exclusive. We are therefore combining the
sensibility of social enterprise with the form
of a for-profit business.
A very novel initiative was started in
this direction, which proved to be quite
useful in reaching out to almost every
household of J&K. The initiative was to
print the Ration Books for the Government.
The State government annually prints and
distributes around twenty lakh ration books
to consumer families to facilitate them
purchase of rations from govt. owned fair
price shops. Practically every family in the
state gets a ration book including more
than 8 Lakh BPL families. These ration
14 J & K BA N K A N N UA L R EP O R T 20 07– 0 8
08070xxx_01_25.indd 14
books reach places where even roads don’t
go. The ration card, therefore, could be
used as an ideal delivery vehicle to reach
out to the ‘unbanked’ people and to carry
out the empowerment initiative through
an assured and established distribution
network active across J&K.
Our Strategy, Communications and
Design teams got together to design an
aesthetically pleasant and functionally
multi dimensional handbook that would
not only get the people their rations but
a slew of financial services as well. It was
for the first time a professionally designed
ration book, with a trendy look was made
available to the general public. And apart
from ration coupons, the ration book
contained pages on financial education; a
brief introduction to our various services
and products. Not only that, customer
relationship forms for a variety of our
products like the “Girl Child Deposit
Product”, “All Purpose Agri-term loan”
etc were provided in the ration books.
The results of this initiative were quite
remarkable. People in far-flung areas for
the first time got something to read about
the financial services options available to
them. And that too in their own mother-
tongue. Armed with the simplified
7/16/08 3:29:10 PM
 application forms provided within the
ration book, they went to their nearest
branches to put their hard earned money
to better use instead of keeping the cash
at home. Many more even came for
credit. Vegetable growers, milk wallas,
students aspiring to go for higher studies,
young parents concerned about their
child financial security; all flocked down
to our branches to avail the banking
services.
The ration books also contained
“Personal Information” coupons, which
helped the bank create a database of
around 20 lakh people. The data would
be used for strategizing the Banks
other initiatives aimed at economic
empowerment.
The bank spent quite a sum on
printing these ration books, which was
otherwise to be spent by the government.
But the smiles on the faces of our people
were a return that was matchless!!!

J & K BA N K A N N UA L R EP O R T 20 07– 0 8 15

08070xxx_01_25.indd 15 7/16/08 3:29:10 PM

 Chairman’s Statement
A difficult year has gone by and an uncertain one lies
ahead. Needless to say, managing a business in an
uncertain macroeconomic environment is more
complex than in an adverse year. This is true both from
a policymaking perspective and from an operational
one. As the looming uncertainty is not the result of a
single factor there can be no single answer, no elegant
solution, that will deliver a quick turnaround.

The dangers of managing a business (or

for that matter, an economy) in uncertain
environs lie in under estimating the extent
and intensity of the downside. There is
an obvious upside to this and it can be
tempting to drive the business on the basis
of what is “likely to happen” rather than
“what could happen”. However, taking
the latter route minimizes the risk, even as
it leaves scope for some pleasant surprises.
This in effect means that in the year ahead,
conservatism would be the best course
for Indian banks. This is the time to
strengthen internal systems and controls
and exploit productivity and efficiency
gains to enhance the bottom line.

The year 2007-08 was one of the most

difficult in recent times. The list of
economic woes was unending: surging
inflation, unprecedented oil prices,
deteriorating fiscal situation, reversing
foreign investment flows and a
depreciating rupee. To a large extent,
external factors were responsible, but
the fact that the Indian economy has, in
a matter of months, gone from being the
pick of the emerging markets to a
vulnerable one raises fundamental
questions.

16 J & K BA N K A N N UA L R EP O R T 20 07– 0 8

08070xxx_01_25.indd 16 7/16/08 3:29:10 PM

 It is now obvious that what we are
seeing is an overheated condition of the
economy aggravated by adverse supply
conditions, from oil, food and other
commodities. The situation can also be
seen as part of the “impossible trinity”
and as such is intertwined with capital
inflows, exchange rate, and interest rates.
This complex scenario makes policy
formulation difficult. The only recourse is
to use monetary and other related
instruments, but these work effectively
when the fiscal side is well in control.
With that not being so, the process of
managing the downturn is much more
difficult, but not intractable.
The critical point is that many of the
symptoms of the current economic
condition do appear to have a long- term
dimension that poses risks for sustainable
growth. However, to be clear, there is not
the least uncertainty about the economic
future of India. In other words, the
long- term prospects are based on
structural advantages while the short
run problems have arisen out of
situational infirmities.
The method and manner in which
these situational issues are being
addressed — almost exclusively through
monetary policy interventions — is
sure to result in the impact being
disproportionately borne by the banking
sector. Indeed, from the manner in which
monetary measures are being nuanced
it seems clear that financial sector
players will have to share a part of the
adjustment costs.
The mechanics of this are not far to seek.
There is bound to be a rise in the cost of
funds: advances yield will not adequately
compensate the increased costs
especially when growth will slowdown
and there is likely to be an upward trend
08070xxx_01_25.indd 17
in impairment of assets. This will further
depress the advances yield and as such
margins will come under pressure.
The sector will continue to be plagued
by write downs, mark-to-market losses,
and falling treasury income. Indian banks
will also see the full extent of losses on
foreign exchange derivative contracts
used to hedge currency risk.
In general, confidence levels are low, and
uncertainty about write downs continues.
This has resulted in sharp corrections in
the banking sector. Treasury operations
are likely to see higher mark to market
losses and fee- based income will plateau.
It is clearly not an easy time for anyone
in the banking sector. Within the overall
macro-economic situation and its
attendant sectoral issues, what is the
scope and strategy for the J&K bank?
For the last one year, in anticipation of
the evolving situation, our goal has been
to make our business model more
flexible, so that even with a slower
economy and single-digit revenue
growth, we achieve our long-term
earnings’ targets. The business model
that we worked out three years ago
is yielding dividends in terms of its
flexibility. So far, the Bank has managed
to come through an increasingly
difficult period exceptionally well,
largely because of our success with
anticipating and providing for some
difficulties and policymoves. Our
2007- 08 earnings were robust, net
interest margins were stable, impairment
was reduced, so was the cost to income,
and return on equity and assets reached
much above peer group levels. The Bank
continued to be adequately capitalized
as we added our franchise, explored new
businesses, and launched new products
and partners.
J & K BA N K A N N UA L R EP O R T 20 07– 0 8 17
7/16/08 3:29:11 PM
 Those who have kept track of the
evolving strategies and shifts in the Bank
business over the last three years should
expect us to leverage the autonomous,
public-investment driven J&K growth, to
lay the foundations for a “contra-cyclical”
strategy of growth for the Bank. At the
sub-national macroeconomic level, there
has been a big boost in infrastructure
spending, with minimal leakage into the
national/global economy. As such, the
asset growth in J&K has, on an average,
been about 30 to 48 per cent over the last
one year and will continue at this rate
for the next 2-3 years. The Bank plans to
grow its business outside of J&K at the
average sectoral rate of about 15 per cent.
This, along with a 35 per cent growth in
J&K, would give the Bank an aggregative
asset growth of over 25 per cent.
This growth, along with a yield arbitrage
of 300 basis points, will see that the
pressure on net interest margins is
minimized and profitability maintained.
However, we are factoring in a squeeze
on the incremental net interest
margin, which is expected to dampen,
if not nullify, through better liability
management. In other words, with a clear
strategy in place, one that is working
better than anticipated, there is need only
for a reaffirmation of current strategies,
structures and potential outcomes.
While it may not be possible for a small
company like ours to deliver double-digit
earnings indefinitely, in the light of a
sustained downturn in the markets, J&K
Bank has built-in enough flexibility to
weather a short-term period of weakness
and still deliver the financial returns
that our investors expect. Our recent
performance has made the organization
more optimistic, as strategic shifts in our
strategy and internal reorganization have
helped us deliver the goods. Over the
last two years our organization has
become stronger, our implementation
has improved, and our employees have
developed a more positive outlook about
their work and the company. This, more
than anything else, has been the key
ingredient in overcoming any macro-
economic business cycle or sectoral
stringency.
Haseeb A Drabu
Chairman & CEO

Our conservatism and consolidation of

the last three years has paid off. In spite
of the short-term environment issues, we
continued to invest. The critical choice
we made was not to sacrifice the medium
to long-term growth of the company
in order to meet a short-term goal, be
it business, incomes or profits. Our
priority is to ensure sustained long-term
profitability.

18 J & K BA N K A N N UA L R EP O R T 20 07– 0 8

08070xxx_01_25.indd 18 7/16/08 3:29:11 PM

 Board of Directors

1 Haseeb A Drabu 5 A K Mehta

Chairman Executive Director
2 3

2 M S Verma 6 Abdul Majid Mir

Director on the Board Executive Director 1 4 5

3 G P Gupta 7 B L Dogra
6 7
Director on the Board Director on the Board

4 B B Vyas (IAS)
Director on the Board

J & K BA N K A N N UA L R EP O R T 20 07– 0 8 19

08070xxx_01_25.indd 19 7/16/08 3:29:11 PM

 6

9 8

08070xxx_01_25.indd 20 7/16/08 3:29:14 PM

 Vice Presidents
Ghulam Mohammad Reshi
Ghulam Ahmad Regoo
Suman Durswal
Shamsher Singh Nathyal
Madan Lal Gupta
Ram Prakash Sharma
Mohammad Amin Pandow
Abdul Rashid
Nazir Ahmad Parimoo
Mohammad Amin Narchoor
Raja Abudl Latif
Executive Committee Mohammad Afzal Khan
Bashir Ahmad Lone
Om Prakash Sharma
Fazle Mehboob Gani
Javeed Mustafa Rafiqi
1 Haseeb A Drabu Vagish Chander
Chairman & Chief Executive Abdul Hamid Banday
Shafat Ahmad Banday
2 A K Mehta Meera Jamwal
Executive Director & COO Roop Krishan Shah
Surjeet Singh
3 Abdul Majid Mir Abdul Rouf Bhat
Executive Director & CFO Abdul Rashid
Mohammad Syed Wani
4 Ajit Singh S.K.Bhat
Sr. President & CPO Nayeem-ullah
Khursheed Ahmad Pandit
5 G A Beigh
President & Chief Strategist
Company Secretary
6 Tafazal Hussain Parvez Ahmed
President & CCO

7 Sahibzada Ghulam Mohi-udin (not in picture) Auditors

President & Country Head-Sales Gupta Gupta & Associates
Chartered Accountants
8 K K Sharma
President & CTO Gupta Sharma & Associates
Chartered Accountants
9 Parvez Ahmed
President & Company Secretary Baweja & Kaul
Chartered Accountants

Registered Office
M A Road
Srinagar 190 001
Jammu & Kashmir

Corporate Headquarters
M A Road
Srinagar 190 001
Jammu & Kashmir
www.jkbank.net

J & K BA N K A N N UA L R EP O R T 20 07– 0 8 21

08070xxx_01_25.indd 21 7/16/08 3:29:15 PM

 22 J & K BA N K A N N UA L R EP O R T 20 07– 0 8

08070xxx_01_25.indd 22 7/16/08 3:29:15 PM

 THE BEAUTY OF BUSINESS
The most famous international brand of
natural beauty is Kashmir. While it is a
great advantage, it has subsumed many
other aspects of J&K; primarily, the presence
of life and potential of doing business. The
focus on meadows and mountains, and
lakes and gardens has put into shade the
reality of existence in the state.
Yes, there is unparalleled beauty in every
speck of Kashmir, there are, but , also real
people doing real business. They toil to make
a living; they sweat to eke out an existence,
they use their creative abilities to create
unparallel crafts. They run industries, they
manage enterprises. There is vibrancy in
their life and business.
At the J&K bank, while we adore the
beauty of the state, we admire the people’s
ingenuity to do business.

J & K BA N K A N N UA L R EP O R T 20 07– 0 8 23

08070xxx_01_25.indd 23 7/16/08 3:29:26 PM

08070xxx_01_25.indd 24 7/16/08 3:29:32 PM
 Financials 2007-08

J & K BA N K A N N UA L R EP O R T 20 07– 0 8 01

08070xxx_01_25.indd 25 7/16/08 3:29:36 PM

 &-" /+-.

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J & K BA N K A N N UA L R EP O R T 20 07– 0 8 31

08070330_25_88.indd 31 7/16/2008 6:20:33 PM

 
   


 


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08070330_25_88.indd 32 7/16/2008 6:20:33 PM

 
   


 


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08070330_25_88.indd 33 7/16/2008 6:20:33 PM

 
   


 


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34 J & K BA N K A N N UA L R EP O R T 20 07– 0 8

08070330_25_88.indd 34 7/16/2008 6:20:34 PM

 
   


 


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J & K BA N K A N N UA L R EP O R T 20 07– 0 8 35

08070330_25_88.indd 35 7/16/2008 6:20:34 PM

 
   


 


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08070330_25_88.indd 85 7/16/2008 6:20:42 PM

 Notes

86 J & K BA N K A N N UA L R EP O R T 20 07– 0 8

08070330_25_88.indd 86 7/16/2008 6:20:43 PM

 J & K BA N K A N N UA L R EP O R T 20 07– 0 8 87

08070330_25_88.indd 87 7/16/2008 6:20:43 PM

 88 J & K BA N K A N N UA L R EP O R T 20 07– 0 8

08070330_25_88.indd 88 7/16/2008 6:20:43 PM

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