Shares of the Jammu & Kashmir Bank Ltd are locked in 20 percent upper circuit on Wednesday, quoting at Rs 45 per share on the NSE. The stock has seen an upward trend over the last two days and has risen almost 32 percent during the period.

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The gains have come as the Narendra Modi government at the centre moved a resolution to scrap Article 370 of the Indian Constitution which provided special status to Jammu and Kashmir. Additionally, the Modi government moved a Bill to bifurcate the state into two union territories of Jammu and Kashmir and Ladakh.

The new administrative structure and any future potential big-ticket infrastructure spending in the two union territories will likely benefit Jammu and Kashmir Bank as well.

Apart from the State Bank of India, the J&K Bank is the only other major bank in the region with good presence.

On Saturday, J&K Bank reported a 58.4 percent decline in net profit to Rs 21.87 crore on 18.9 percent rise in total income to Rs 2,256.25 crore in Q1 2019 over Q1 2018.

The bank's gross non-performing assets (NPAs) stood at Rs 6,030.84 crore as of June 30, 2019 against Rs 6,221.35 crore on March 31, 2019 and Rs 6,241.67 crore on June 30, 2018.

The J&K Bank has in recent weeks has seen governance issues with its chairman and managing director Parvez Ahmed being sacked last month on charges of corruption and nepotism.

The bank had since appointed RK Chhibber as its interim chairman and managing director.

J&K Bank shares have gained over 19 percent so far this year but the one-year return on the stock is negative with the small cap private bank stock correcting by nearly 22 percent.

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