Srinagar: Valley’s apex industrial organisation, the Federation of Chambers of Industries Kashmir (FCIK) has reiterated its demand for complete withdrawal of the decision of J&K Bank to levy commitment charges on unutilized portion of working capital facility sanctioned in favour of enterprises.
Responding to the statement of bank authorities regarding slashing down of commitment charges as “goodwill gesture” towards enterprises, the FCIK stated that the very concept of penalizing the borrowers for non-utilizing or under-utilizing their loans was an anti-customer move particularly under the sharp and long prevailing slowdown with market appetite for demand of industrial products running at its lowest ebb. The FCIK opined that commitment charges would further affect the health of enterprises at a time when these were already overburdened with huge establishment expenses including bank interest on the money blocked in their inventories and finished goods with no buyers in sight.
Countering the claims of J&K Bank about Commitment charges being lowest in the banking industry, FCIK informed that charges of 25000-50000 rupees on a 100 lac loan as per bank’s SOP, issued under Circular 99-673 on 10th of current month, could not be termed as a small sum. The charges would proportionally be higher in respect of enterprises with increased limit of the loan. FCIK asked the bank to realize that several of its competitors in the UT had adopted the policy of not charging commitment fee perhaps in the hope of expanding their customer base.
FCIK acknowledged that both the depositors and borrowers of UT of J&K had emotional bondage with J&K Bank and the enterprises remained attached to it through thick and thin despite the fact that interest rates charged by the bank from enterprises during past over three decades were “unprecedently highest” in the industry. However, the apex organisation also realizes that J&K Bank was the only one to flow credit to the enterprises at a time when all others players in the banking industry had curtailed their operations in the erstwhile state. FCIK hoped that this bonded relation was not affected or marred by some undesired decisions by the bank now.
FCIK further acknowledged that the bank had been extending some small concessions to its customers during past few decades including Commitment charges either by its own will or by the directions of RBI. However, the bank also needed to realize that the customers with huge periodical surplus in their current deposit/saving deposit account had never insisted for implementation of schemes to their benefit like Sweep-in/Sweep-out deposit facility which could have earned them huge amounts for unutilized/underutilized funds in these accounts. FCIK cautioned that the rigid approach on the part of bank might make the customers also to rethink on their advantages and benefits.
FCIK has also conveyed regret that the bank had not formally responded to or taken cognizance of letter written by the apex industrial body on the subject about a month back whereby ample arguments had been put forth with request to the bank for keeping their decision on freeze till the market situation improved. It was also made clear that levying of commitment charges was the prerogative of bank as the same was never made mandatory upon the financing banks by RBI.
The FCIK hoped that the bank would revisit its decision in the interest of maintaining its long term relations with the customers of UT of J&K.
