Jammu and Kashmir’s banking sector witnessed a significant borrowing boom in the first half of the current financial year 2025-26, with banks disbursing over ₹43,017 crore in credit. This substantial lending reached more than 10 lakh beneficiaries across the Union Territory between April and September 2025. The strong performance reflects a robust 23 percent year-on-year growth in credit disbursement, signaling positive momentum for J&K’s economy.
Record Credit Fuels Economic Growth
Banks in Jammu and Kashmir achieved approximately 68 percent of their Annual Credit Plan (ACP) target of ₹63,679.13 crore for the financial year 2025-26 within just six months. This rapid pace of lending covered around 57 percent of the total account target, which stands at 17.6 lakh beneficiaries. The credit was extended across 10,06,737 loan accounts, demonstrating broad-based financial inclusion efforts. Lending rates during this period varied, typically ranging from 7.25 percent to about 14 percent, depending on the loan segment.[m+1]
Prioritysector lending played a crucial role in this credit expansion, leading the way with a 25 percent year-on-year growth. Banks disbursed ₹22,428.93 crore to the priority sector, covering 6,14,089 accounts. This achievement represents 52 percent of the annual amount target and nearly half of the account coverage goal for this vital segment. Non-priority sector lending also showed strong performance, with banks disbursing ₹20,588 crore across 3,92,648 accounts. Notably, the non-priority sector surpassed its full-year target of ₹20,366.96 crore by achieving 101 percent in just six months.[m+7]
Strategic Focus on Key Sectors
Chief Secretary Atal Dulloo emphasized the need for banks to intensify efforts to meet Priority Sector Lending (PSL) targets. He urged financial institutions to expand their reach into unbanked rural areas to support key sectors essential for J&K's economic progress. Dulloo highlighted agriculture as a major opportunity and called on banks to provide adequate credit to support the sector's growth and upliftment. He also pushed for smooth lending under various government schemes. These include the Holistic Agriculture Development Programme (HADP), PM Vishwakarma, Mission YUVA, and homestay initiatives, all designed to create self-employment opportunities for the youth.[kashmirlife+4]
Private sectorbanks were significant drivers of this credit surge, disbursing ₹18,042.63 crore in priority sector lending alone. This marked a 25 percent increase compared to the same period last year. They achieved 65 percent of their annual priority sector target. Public sector banks recorded the highest growth rate of 30 percent year-on-year in priority sector lending, with a total disbursement of ₹2,989.90 crore across 53,094 accounts. Regional Rural Banks also saw a 27 percent growth, disbursing ₹1,324.31 crore to 1,19,610 accounts. Cooperative Banks, however, experienced a 19 percent decline in lending, with disbursements totaling ₹72.10 crore.[kashmirobserver+6]
Strengthening Banking Fundamentals
The robust credit uptake is supported by improving banking fundamentals across Jammu and Kashmir. Total deposits grew 8 percent year-on-year, reaching ₹2,03,524 crore in the first half of FY26. This increase enhances the lending capacity of banks within the region. Total advances, excluding Rural Infrastructure Development Fund (RIDF), rose 6 percent to ₹1,24,780 crore. Priority sector advances saw a sharp increase of 17 percent, reaching ₹54,520 crore, and now constitute 44 percent of total advances, up from 40 percent a year ago.[greaterkashmir+1]
Asset quality also showed improvement, with gross non-performing assets (NPAs) declining by 22 percent year-on-year. They fell from ₹5,073 crore to ₹3,968 crore. Jammu & Kashmir Bank, a prominentregional lender, reported a strong financial performance for the fiscal year 2024-25, achieving a net profit of ₹2,082.46 crore. The bank's business portfolio grew by 10 percent year-on-year, reaching ₹2,52,768 crore, and it surpassed its Annual Credit Plan 2025 target by disbursing ₹51,839 crore, achieving 182 percent of its goal.[greaterkashmir+2]
Economic Resilience Amid Challenges
The significant lending activity occurred despite various operational challenges faced by the region. These included disruptions caused by the Pahalgam terror attack, cross-border tensions, and floods that affected J&K between April and September. Despite these hurdles, lending to the priority sector remained satisfactory.[kashmirobserver+2]
Jammu and Kashmir's economy is undergoing a substantial transformation, moving from decades of conflict to a period of growth and development. The Union Territory's Gross State Domestic Product (GSDP) is projected to reach ₹2.65 lakh crore in 2024–25. The region has consistently recorded over 7percent annual growth between 2021-22 and 2024-25, driven by robust infrastructure projects, a surge in tourism, and rising private investment. The industrial sector is also emerging as akey driver, contributing 18.3 percent to the Gross State Value Added (GSVA). Investment proposals worth ₹1.63 lakh crorehave been received since 2019, with nearly 2,000 new industrial units becoming operational. This strong economic backdrop provides a fertile ground for continued credit expansion and financial inclusion across J&K.[kashmirobserver+13]
