Srinagar, Apr 16: Growing concern over mounting financial stress in Jammu and Kashmir’s industrial sector has triggered fresh calls for a comprehensive, region-specific Special One-Time Settlement (SOTS) framework to address legacy debt and revive struggling enterprises.
With a new industrial policy in the pipeline, stakeholders warn that the absence of a structured debt-resolution mechanism continues to undermine the viability of existing units, even as policy focus remains tilted towards attracting new investments.
This is where the role of the lead bank becomes central.
J&K Bank, by virtue of its deep regional presence, deposit base, and credit exposure, occupies a unique position in the economic architecture of the Union Territory. A substantial portion of its deposits originates from within the region—mobilized at one of the lowest costs in the banking system—while a dominant share of its lending is also deployed locally. In effect, the region’s economic ecosystem sustains the bank, just as the bank sustains the region’s enterprise base.
Yet, when it comes to addressing stress within this very ecosystem, the response has remained narrowly structured.
The One-Time Settlement scheme introduced in 2024, though a step in principle, fell short in scope and impact. By imposing upper thresholds and restrictive eligibility conditions, it excluded a significant segment of borrowers—particularly those with larger exposures—many of whom represent established enterprises with substantial employment and asset bases. These are precisely the units whose revival carries the greatest economic multiplier effect, yet they remain outside the ambit of relief.
This selective approach has, in effect, created a paradox: those most in need of resolution remain least covered.
The urgency of a renewed and expanded Special One-Time Settlement (SOTS) framework, therefore, cannot be overstated. Such a framework must move beyond conventional limits and thresholds, and instead recognize the exceptional context of Jammu & Kashmir. The financial stress carried by a large number of enterprises in the region is not the outcome of routine commercial cycles, but of prolonged and extraordinary disruptions that impaired their operational continuity.
Equally important is the question of cost.
For years, borrowers in the region have serviced credit at rates significantly higher than prevailing national benchmarks—often justified under “market risk” considerations. This differential, sustained over long periods, has compounded the debt burden and contributed materially to the stress now reflected in NPA accounts. When viewed alongside the fact that the bank’s deposit strength is overwhelmingly drawn from the same region, the case for calibrated concessions within an SOTS framework becomes not only logical, but necessary.
A region-specific SOTS must, therefore, be designed with a clear developmental perspective—one that acknowledges past realities rather than applying uniform templates. It must be comprehensive in coverage, non-discriminatory in access, and free from rigid ceilings that defeat its very purpose. The objective cannot be revenue maximization alone; it must be resolution, restoration, and reintegration of enterprises into the economic cycle.
The need for urgency is equally compelling.
With a new industrial policy on the anvil—one that is expected to prioritize revival alongside new investments—the absence of a parallel debt-resolution mechanism would render the exercise incomplete. It is difficult to envision a credible revival roadmap when a large segment of enterprises continues to remain financially impaired, with no viable exit or restructuring pathway.
There is also a larger institutional dimension that merits reflection.
While regulatory frameworks may justify uniform treatment of borrowers across geographies, they do not preclude context-sensitive interventions—particularly in regions that have experienced prolonged disruptions. The distinction between willful default and circumstantial stress must inform policy design, especially in a region where enterprise continuity itself has been a challenge.
The continued delay in introducing a meaningful SOTS framework raises uncomfortable questions—not about intent at the highest levels, but about prioritization and initiative within the system. It is difficult to assume that the broader leadership—whether at the Union level or within the Union Territory—would remain indifferent to the plight of existing enterprises, had the issue been pursued with the urgency and clarity it demands.
At its core, this is not merely a banking issue; it is an economic reset waiting to happen.
A well-structured, region-specific SOTS offers the possibility of clearing legacy stress, restoring confidence among borrowers, strengthening the bank’s balance sheet, and aligning the financial system with the broader objective of industrial revival. It provides an honorable exit where required, and a fresh beginning where possible.
The question is no longer whether such an intervention is justified—the realities on the ground have already answered that. The question is whether the system is prepared to act with the scale, sensitivity, and urgency that the moment demands.
Until then, the narrative of “Ease of Doing Business” will remain incomplete—anchored in new beginnings, but disconnected from unresolved pasts.
