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Friday, Feb 15, 2002

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J&K Bank to offer 5 pc equity to foreign partner

Sarbajeet K. Sen

NEW DELHI, Feb. 14

JAMMU and Kashmir Bank (J&K Bank) has opened negotiations to rope in a foreign strategic partner that would be offered a 5 per cent equity holding in the bank.

The Chairman, J&K Bank, Mr M. Y. Khan, told Business Line that the process of induction of a foreign partner was likely to be completed in a couple of months. He said the foreign entity that finally picks up a stake in the bank would also be offered a seat on the board.

"We have started negotiations with a couple of foreign banks for induction of a strategic partner. The process should be completed in another three to six months,'' Mr Khan said.

He said the strategic sale would be limited to 5 per cent of the bank's equity since any offer beyond that would require clearance from the Reserve Bank of India. "The partner might pick up another 4-5 per cent from the market,'' Mr Khan said.

Currently, the Jammu and Kashmir Government holds 53 per cent of the bank's paid-up capital of Rs 48.5 crore, while the public holds 37 per cent and the remaining 10 per cent is with foreign institutional investors and employees of the bank.

Mr Khan said that since the bank would like to retain the J&K holding at above 50 per cent, the State Government would have to first increase its holding slightly before the 5 per cent is handed over to the strategic partner. "The majority Government holding has been quite beneficial to us,'' Mr Khan said.

He said the induction of the representative of the foreign strategic partner would be a logical culmination of the process of broad-basing the board of directors, which had started recently with the induction of three directors from outside J&K State for the first time.

The reconstituted board has former Chairman, Eleventh Finance Commission, Prof A. M. Khusro, former Chairman and Managing Director, IDBI, Mr G. P. Gupta, and Mr Vipin Malik, former director, RBI. "Earlier, all the directors, barring some of the nominee directors, were from within the State. We have broad-based the board now,'' Mr Khan said.

He said that there were no plans to raise further capital from the market at present. "We already have a healthy capital adequacy ratio of 17 per cent plus. But we have invested Rs 25 crore in the insurance venture. So, we may need to raise capital after a couple of years,'' Mr Khan said.

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