India
Cag: Wasteful expenditure: CAG pulls up J&K Bank for hiring Broadway hotel for ops | India News
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SRINAGAR: The Comptroller and Auditor General (CAG) of India has pulled up the Jammu and Kashmir Bank for incurring a wasteful expenditure of Rs 5.28 crore by hiring hotel Broadway in Srinagar, which was not used at all for its operations.
In its report tabled in the Parliament on Tuesday, the CAG said that the bank entered into a lease agreement with the firm M/s Broad Way Enterprises Private Limited in December 2017 and March 2019 for hiring space in Hotel Broadway for the opening of High Net worth Individual (HNI) Branch and shifting its International Banking Division (IBD), respectively, at a monthly rent of Rs 150 per sqft.
The bank cited space constraints at its existing premises at Air Cargo Complex, Srinagar, for the same. It also placed a work order worth Rs 2 crore for the development of the hired premises in February 2019.
In January 2020, however, the bank decided to de-hire the premises “on the ground that shifting of IBD would not translate into phenomenal growth of foreign exchange business as the forex business in Srinagar was limited. Further, the yearly rental outflow was considered very high vis-à-vis the business opportunities in the opening of HNI branch due to prevailing situation in Kashmir region,” the CAG report stated.
By the time the bank de-hired the premises in June 2020, it had incurred an expenditure of Rs 3.78 crore towards rent and Rs 2.43 crore on developing the premises. The development costs included Rs 1.47 crore on interiors and furniture items that either couldn’t be dismantled or were dismantled with substantial/major damages, the report said. “The dismantlement work was carried out in August 2020 at a cost of Rs 2.99 lakh,” it added.
The CAG questioned why the bank hired space in the hotel despite already having hired separate premises for its opening at Barzulla, Srinagar, and operating IBD at Air Cargo Complex having sufficient space at a monthly rate of Rs 75 per sqft and Rs 85 per sqft, respectively.
“Moreover, the decision to open HNI branch and shift IBD at Hotel Broadway may be viewed in light of the fact that the bank sanctioned (September 2016) a term loan of Rs 48.98 crore in favour of the lessor for renovation of existing hotel building and construction of new building and the term loan was eventually classified (January 2020) as Non-Performing Asset as the lessor could not service the account,” the report added.
In its reply, the bank management stated that in March 2022, owing to sluggish market patterns and slow growth in the overall banking sector, it decided to implement various measures to bring down the cost-to-income ratio and one of the measures was to vacate the premises in order to cut the costs on account of rental.
“However, the bank hired the premises without taking cognizance of the fact that the decision to open HNI branch at Barzulla, Srinagar was already taken by the management. Further, the limited business opportunity with regard to forex business in Srinagar was in the knowledge of the bank as most of the customers were already dealing with it,” the CAG pointed out.
In its report tabled in the Parliament on Tuesday, the CAG said that the bank entered into a lease agreement with the firm M/s Broad Way Enterprises Private Limited in December 2017 and March 2019 for hiring space in Hotel Broadway for the opening of High Net worth Individual (HNI) Branch and shifting its International Banking Division (IBD), respectively, at a monthly rent of Rs 150 per sqft.
The bank cited space constraints at its existing premises at Air Cargo Complex, Srinagar, for the same. It also placed a work order worth Rs 2 crore for the development of the hired premises in February 2019.
In January 2020, however, the bank decided to de-hire the premises “on the ground that shifting of IBD would not translate into phenomenal growth of foreign exchange business as the forex business in Srinagar was limited. Further, the yearly rental outflow was considered very high vis-à-vis the business opportunities in the opening of HNI branch due to prevailing situation in Kashmir region,” the CAG report stated.
By the time the bank de-hired the premises in June 2020, it had incurred an expenditure of Rs 3.78 crore towards rent and Rs 2.43 crore on developing the premises. The development costs included Rs 1.47 crore on interiors and furniture items that either couldn’t be dismantled or were dismantled with substantial/major damages, the report said. “The dismantlement work was carried out in August 2020 at a cost of Rs 2.99 lakh,” it added.
The CAG questioned why the bank hired space in the hotel despite already having hired separate premises for its opening at Barzulla, Srinagar, and operating IBD at Air Cargo Complex having sufficient space at a monthly rate of Rs 75 per sqft and Rs 85 per sqft, respectively.
“Moreover, the decision to open HNI branch and shift IBD at Hotel Broadway may be viewed in light of the fact that the bank sanctioned (September 2016) a term loan of Rs 48.98 crore in favour of the lessor for renovation of existing hotel building and construction of new building and the term loan was eventually classified (January 2020) as Non-Performing Asset as the lessor could not service the account,” the report added.
In its reply, the bank management stated that in March 2022, owing to sluggish market patterns and slow growth in the overall banking sector, it decided to implement various measures to bring down the cost-to-income ratio and one of the measures was to vacate the premises in order to cut the costs on account of rental.
“However, the bank hired the premises without taking cognizance of the fact that the decision to open HNI branch at Barzulla, Srinagar was already taken by the management. Further, the limited business opportunity with regard to forex business in Srinagar was in the knowledge of the bank as most of the customers were already dealing with it,” the CAG pointed out.
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