“The decision resulted in unnecessary expenditure of Rs 5.28 lakh; not used at all for operations before the lease; asked why the HNI branch was renting a hotel space when it had already decided to open it in Barzulla”
Comptroller and Auditor General of India has asked Jammu and Kashmir Bank to withdraw Rs 528 crore wastage incurred for renting the Broadway Hotel in Srinagar, the bank said. the hotel is not used for operations at all.
In a report to Parliament on Tuesday, CAG said the bank had entered into a lease agreement with Broad Way Enterprises PrivateLimited (Company) in 2017, a copy of which was held by the Kashmir News Observer (KNO).
In December 2019 and March 2019, it leased space at the Broadway Hotel for the opening of High Net Worth Individuals (HNI) branches and its International Banking Department (IBD), respectively, at a monthly rent of 150 rupees per square foot.
He has leased space to accommodate his International Banking Department (IBD) due to space constraints in the existing premises of the Srinagar Air Cargo Center. The bank had also placed a work order at a cost of Rs 2 crore in February 2019 for fitting out leased premises.
However, in January 2020, the bank decided to vacate the premises due to crowds. According to the CAG report, the bank has decided in January 2020 to vacate the premises on the grounds that the relocation of IBD will not result in a significant increase in foreign exchange business as foreign exchange business in Srinagar is limited.
Further, due to the prevailing situation in the Kashmir region, opening Annual rent outflows are considered very high in terms of business opportunities for HNI agencies,” the report said.
“By the time the bank (June 2020) vacated the premises, Rs 3.78 lakhs had been incurred for rental costs and Rs.2.43 lakhs for office space development.
Out of Rs 2.43 crore, Rs. 1.47 crore was for civil upholstery, furniture which could not be dismantled or was dismantled and caused major/significant damage Demolition was carried out in August 2020 at a cost of Rs 2.99 lakh,” he added.
CAG queried why the bank is renting space in the hotel even though it has leased premises in Barzulla, Srinagar and operates IBD at Srinagar Air Cargo Centre, there is enough space at Rs 75 per square feet & Rs 85 per square foot month.
“Furthermore, the decision to open an HNI branch at Broadway Hotel and relocate IBD can be seen in view of the amount. The construction of the building together with the term loan was finally classified as non-report continues.
The management of Jammu and Kashmir Bank in its March 2022 response stated that due to market sluggishness and overall weak growth in the banking sector, it has decided to implement various measures to improve the cost/revenue ratio, one of which is to leave the premises to reduce the cost of rent.
“However, the fact remains that the banks rented the premises not realizing that the management had taken the decision to open the HNI branch in Bazura, Srinagar was related to foreign exchange trading in Srinagar limited trading opportunity as most customers are already dealing with it,” noted CAG
