In a significant development poised to bolster the economic landscape of Jammu and Kashmir, J&K Bank has announced the cessation of its contentious “Name and Shame” policy. This decision, unveiled during a high-level meeting with the Federation of Chambers of Industries Kashmir (FCIK), marks a transformative approach in the bank’s relationship with the Micro, Small, and Medium Enterprises (MSMEs) sector.
The ‘Name and Shame’ Policy
The “Name and Shame” policy involved the public disclosure of borrowers who defaulted on loan repayments. By publishing SARFAESI notices and e-auction advertisements in newspapers, the bank aimed to recover dues by exerting public pressure on defaulters. However, this practice faced widespread criticism for its potential to tarnish reputations and exacerbate the challenges faced by struggling businesses.
MSMEs are often considered the backbone of the regional economy, contributing significantly to employment and local development. The public shaming associated with the policy not only damaged the reputations of these enterprises but also hindered their ability to secure future financing and business opportunities. The FCIK highlighted that many MSMEs were grappling with financial difficulties due to external factors beyond their control, and the policy further compounded their challenges.
During the meeting, J&K Bank’s Managing Director and CEO, Amitava Chatterjee, assured the FCIK delegation of a paradigm shift in the bank’s approach. He emphasized the bank’s commitment to supporting the MSME sector by discontinuing the public shaming of borrowers and halting the premature classification of MSME accounts as Non-Performing Assets (NPAs). Chatterjee stated, “We are committed to supporting the MSME sector and ensuring that viable businesses are given a fair chance to recover.”
Adherence to Government and RBI Guidelines
The bank’s decision aligns with the Government of India’s 2015 Notification and the Reserve Bank of India’s 2016 Guidelines on MSME Rehabilitation. These directives advocate for revival and restructuring mechanisms over liquidation, emphasizing the importance of providing viable businesses with opportunities to regain financial stability. By adhering to these guidelines, J&K Bank aims to foster a more supportive financial environment for MSMEs.
The FCIK delegation, led by President Shahid Kamili, welcomed the bank’s decision, describing it as a significant step toward fostering a more supportive financial environment for MSMEs. Kamili praised Chatterjee’s cooperative approach, stating, “This marks a crucial turning point in the bank’s relationship with the business community. We are optimistic that this shift will help revive struggling enterprises and strengthen the region’s economy.”
In addition to addressing the “Name and Shame” policy, FCIK presented a comprehensive 25-page charter of demands to the bank. The document outlined key measures to streamline credit access, resolve the NPA crisis, and support the growth of local businesses. The delegation proposed a three-pronged strategy to address the challenges faced by MSMEs, urging the bank to adopt a more inclusive and structured approach to debt resolution.
MSME Rehabilitation Framework
The move by J&K Bank reflects a broader recognition of the need for supportive frameworks for MSME rehabilitation. The Reserve Bank of India’s guidelines emphasize the importance of timely and transparent mechanisms for restructuring the debts of viable MSMEs facing challenges. The objective is to preserve viable MSMEs affected by internal and external factors and minimize losses to lenders and other stakeholders through an orderly, coordinated, and pre-emptive restructuring program.
J&K Bank’s decision to discontinue the “Name and Shame” policy represents a significant shift toward a more empathetic and supportive approach to MSME financing. By aligning with government and RBI guidelines and engaging constructively with industry bodies like FCIK, the bank is taking meaningful steps to foster the revival and growth of MSMEs in the region. This move is expected to strengthen the local economy and reinforce the bank’s commitment to its business community.
