J&K Bank sets sight on commodities mart

Jammu & Kashmir Bank is drawing up a strategy to position it as a "super-specialist" in the emerging high-potential commodities sector.

In the national market, it is also setting up a chain of super-specialist branches in key centres, which will offer products and services designed for specific industries.

Such products will command better premiums and yield higher margins as compared with plain vanilla products commonly offered in the market, the bank said.

"The bank is looking at a leather chain in Chennai, Kanpur, Agra and Kolkata. Similarly, spice branches in southern India and castor branches in western India are in the process of being set up," said Haseeb Drabu, chairman and CEO of the bank.

"Depending on the way the experiment shapes up, the bank can become a super-speciality bank focusing on financing commodities. In addition to creating an identity outside J&K, this strategy will have forward linkages with large corporate businesses as most large Indian companies are essentially commodity corporates," Drabu pointed out.

J&K Bank's board today also approved a proposal to increase the limit for foreign institutional investments in the bank to 40 per cent from 33 per cent earlier.

Over the past decade, J&K Bank has followed the model of raising low-cost deposits in J&K and lending outside the state. The focus will now be on increasing lending within the state at relatively higher rates.

"By increasing this, the bank enhances margins and boosts the virtuous cycle of savings and lending," Drabu said.

"This macro aspect combined with the micro reality of advances yield being much higher in J&K than outside gives the shift in business composition an unassailable and compelling logic. At the macro-level, it gives the bank a self-perpetuating business growth and at the micro-level it is margin-enhancing for the bank," said Drabu.