Shares of government-owned Jammu and Kashmir (J&K) Bank crashed 20% on Friday following a news report that the bank had not disclosed non-performing assets (NPAs) of Rs 2,500 crore in its balance sheet for fiscal 2013-14.
After opening unchanged from its previous close of Rs 1,837.65, the stock plunged to an intra-day low of Rs 1,470.
Speaking to dna, Mushtaq Ahmad, chairman and CEO of the bank said, the report was misleading and confused between NPAs and stressed loans. "We had clearly stated in our statements that the bank had gross NPAs of Rs 782 crore and stressed loans of Rs 1,570 crore. Together they sum up to Rs 2,300 crore and does not imply they are NPAs," he said.
There are clear laid-down procedures that the bank follows and the cause to panic was needless, he added.
On being asked that the bank had failed to explain why a Mumbai-based builder with a loan exposure of Rs 400 crore with J&K, is being seen as a defaulter and the cheques issued by the builder and discounted by other banks bounced on due dates, Ahmad said: "I need to check the nitty-gritty of the case. The auditors have already looked into it."
The bank also has another Rs 700 crore in stressed loans in addition to what was declared with a Kolkata-based account. The loan is part of the Rs 6,500-odd crore consortium lending by four other banks. "This has emerged in the current quarter and we are a joint lender with three or four other banks. The forensic audit is being undertaken and we will take a call on restructuring," he said.
While the stock was on a correction mode in intra-day trade, J&K Bank did try to answer the queries in a conference call with analysts but to no avail, as the stock finally ended 18.5% lower at Rs 1,498.05 over its previous close.
"The bank was not convincing enough to lift the sentiment," said an analyst with a private firm explaining the steep fall on Friday.
Most market players felt the market over-reacted to the news.
"The bank is considered the best among government banks with NPAs less than one per cent," said another analyst at a leading brokerage. "The news (on NPAs) was therefore unexpected and a few did panic," he said.
When asked to respond to the market behaviour, Ahmad said: "If the stock prices plummeted and there was selling, do not forgot there were also buyers at the other end who still feel the (lower) levels were attractive buys."
Market participants said the equity markets witnessed an overall selling in banking stocks as they do not expect any surprises from the Reserve Bank of India's monetary policy review on Tuesday. The BSE Bankex ended 1.59% lower at 16,953.86.