• State Administrative Council (SAC), under the chairmanship of Jammu and Kashmir Governor Satya Pal Malik took a decision to turn J&K Bank Limited into a public sector undertaking (PSU).
• It will hence be accountable to the state legislature, and the Finance Department will be required to place the bank’s annual report before the Assembly. The SAC approved a proposal that provisions of the J&K Right to Information Act, 2009, shall be applicable to the bank just like other state-owned undertakings. It will have to follow guidelines of the Central Vigilance Commission. The department has been asked to issue directions to the bank to follow the decisions of the SAC. The bank is yet to receive these directions.

About J&K Bank:

• J&K Bank was established in 1938. It is owned by the J&K government and is a publicly listed entity functioning under the supervision of the Reserve Bank of India (RBI).
• It is the only bank in India in which a state government holds a majority stake. In all public-sector banks, the majority stake is held by the Centre.
• As per the Banking Companies (Acquisition & Transfer of Undertakings) Act, the central government holding in public-sector banks cannot drop below 51%. Thought the state government holds 59.3% in J&K Bank, it is not considered a public-sector bank. This unique status needs to be seen in the context of Article 370 of the Constitution, which gives special autonomous status to the state of Jammu & Kashmir.
• J&K Bank is the largest employer among all state-promoted entities with a workforce of 9,190 in 2015-16.

Analysis:

• Governor’ decision could be an attempt to disengage the bank from political influence and has come in the wake of backdoor entries and massive loans offered to defaulting big business houses.
• Recently, the Governor had accused the previous PDP-BJP government of changing the entire list of 582 selected candidates for jobs in J&K Bank to appoint favourites.
• This decision will also put the Jammu and Kashmir bank under the supervision of RTI and put at least under RTI supervision, the process of selection and hiring will be more transparent.
• Also, in J&K bank, the state government holds a majority stake of 59.3% in J&K Bank so it should have the character of a PSU, which is subject to general supervision and access for enhanced transparency in transaction of business to promote public trust.
• Extension of the RTI Act and CVC guidelines is only aimed at promoting good governance and transparency in the functioning of the bank.