The problem with bad loans

The health of the banking sector is deteriorating. India needs robust insolvency laws

Sunil B.S.   First Published: Thu, Aug 23 2012. 07 30 PM IST

pdated: Thu, Aug 23 2012. 07 36 PM IST

The sharp economic downturn has once again brought the problem of bad loans to the forefront.

In its annual report released on Thursday, the Reserve Bank of India (RBI) pointed out that the health of the banking system is linked to the credit cycle. “Financial institutions tend to overstretch their lending portfolio during economic booms and tend to retrench the same during economic downturns,” it said.

The market is often abuzz with speculation about the inability of some overleveraged business groups to service their bank loans. India has traditionally had a system that tries to help companies in financial distress, making it easy for them to restructure loans. Even RBI has pointed out that the ability of Indian banks to maintain asset quality is “partly on account of the policy of loans restructuring”.

While bad assets of Indian banks have grown 46% in the fiscal year ended March 2012, the growth pace of credit has been at 17%. On 31 March, gross non-performing assets (NPAs) of the banking system amounted to Rs.1.37 trillion and restructured assets Rs.218 trillion.

To reduce the adverse effects of economic downturns on companies and lenders, corporate debt restructuring (CDR) was introduced by RBI in 2001. Despite success in helping companies emerge out of financial troubles, there are several shortcomings in this mechanism. India continues to miss strong insolvency laws.

Restructuring often involves extension of maturities, lower interest rates, debt forgiveness, among others, in case a firm is unable to repay its debt. Further, loans may or may not get classified as NPAs after they are restructured. A working group set up by RBI to review existing guidelines on loan restructuring has recommended increasing the provisions for accounts which get the asset classification benefit on restructuring. Hence, such restructuring places huge stress on the resources of banks

Such restructuring has also attracted criticism about being partial towards big companies. RBI deputy governor K.C. Chakravarty, in a recent speech, raised an important question: Are small and marginal borrowers discriminated against by the banks? An economic downturn is likely to affect smaller companies more adversely than larger ones, so smaller borrowers should be having a greater share in restructured accounts. The data with RBI does not show this.

The soft corner which Indian banks have for large companies is also highlighted by a recent report by Credit Suisse Group AG, which pointed out that the exposure to 10 large industrial groups constitutes 13% of the entire Indian banking system’s loan assets.

In the absence of effective laws on insolvency, many firms who can’t repay their debts for reasons beyond their control remain orphans, and banks are forced to restructure their loss-making assets at a cost. The Sick Industrial Companies Act (SICA), 1985, enabled sick firms to approach the Board for Industrial and Financial Reconstruction (BIFR) to help them revive.

Under the SICA provisions, a company is classified as sick if it has a track record of erosion of net worth over five years. But what is required is a law, which can detect that a company is going through financial difficulty in earlier, and then attempt to revive it. The lack of infrastructure has resulted in bankruptcy procedures under BIFR to take a long time, something which needs to be addressed. Also, steps should be taken to prevent misuse of BIFR provisions by companies that, under section 22 of SICA, seek immunity from creditors after cooking their accounts; this has plagued efficiency at BIFR for long.

Also asset reconstruction companies (ARCs), which were established by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, to acquire, manage and recover illiquid loans or NPAs from banks have failed to take off in a big way. The appetite of Indian investors for securities issued by ARCs is weak, and remains limited to short-tenor papers and those with high ratings. A major hindrance in the way of development of securitization in the country has been high stamp duties. Moreover, the Indian credit markets are closely regulated and loans typically don’t trade on a secondary market, unlike developed countries.

These laws are also tilted in favour of creditors whose major goal remains short term, which is to recover their debts. What is needed are sound insolvency laws in our country along the lines of chapter 11 in the US, which can protect firms and help them adopt a suitable strategy to emerge out of financial difficulties.

http://www.livemint.com/Opinion/FF0FFDxOooUbUDEcAWDHmI/The-problem-with-bad-loans.html

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A reconstruction boom?

For the first time, that there exists a legislative framework that allows ARCs to focus on revival and reconstruction.
Haseeb A. Drabu .

By allowing asset reconstruction companies (ARCs) to convert a company’s debt into equity, the framework of management of non-performing assets is likely to undergo a fundamental change.

Amendments to the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) that allow these changes can potentially alter the landscape of asset reconstruction.

Till now, banks and lenders in general had access and recourse only to the assets of the borrowers. The debt of a company was directly linked to the physical assets created by it. Equity was kept out of these arrangements unless it was specifically earmarked or borrowed against. It was not available for recovery of overdue debts.

With the new amendment passed by both Houses of Parliament, debt and equity have been made fungible as far as recovery from defaulting companies is concerned. ARCs have been given complete and unbridled access to the equity of a defaulting company. With no restrictions on it, either in terms of size or type, this amounts to powers of changing the ownership and, with that, the management and leveraging not just of financial equity but also the business, brand and other types of equity of a company. This has enormous implications not only for lenders and borrowers but the entire financial architecture of the economy.

The biggest problem for ARCs was their ability to extract value from assets. Apart from all the litigation, procedural problems and unreal pricing of impaired assets by banks, ARCs often face a situation where the value of the asset is lower than that of the debt of the defaulting company. In such a case, the enterprise value of a company is less than its asset value. As such, ARCs can’t make much from the assets that they buy.

Despite a situation where the rate of growth of non-performing assets (NPAs) has been higher than the rate of growth of credit and the consequent high levels of NPAs, ARCs have been asset-starved for the past two years. No wonder then that despite permitting the formation of securitization companies and asset reconstruction companies in 2003, the market for impaired assets in India is far from developed.

Even though a number of ARCs have been set up that have been purchasing NPAs from banks, they haven’t been able to develop a robust stressed asset market or an active distress and restructured debt paper market in India. At best, ARCs have functioned as asset-recovery centres that are primarily into asset stripping rather than asset reconstruction and business revival.

This amendment which gives them recourse to equity has the potential to trigger the development of a healthy market for non-performing and impaired assets. The move seems to have been timed well. It comes at a point when the gross non-performing assets of the banking system are at a decadal high and are likely to be around 4% of the gross advances at the end of this fiscal. If one adds restructured assets, one-time exemptions and evergreen ones, the level is almost twice as much. Seen from a stressed asset market perspective, it is a business worth Rs 5 trillion.

If private equity participants—globally there are specialist distressed asset private equity firms—can team up with local ARCs, this can be a great business opportunity. Not only that, it will also be a systemic gain as their ability to turn around companies will be much higher as India seems to be nearing the end of the downturn. This is an ideal time for investments in distressed assets. From next year, interest rates will start declining and as and when growth picks up, the pricing of these assets will improve faster than their prospects of revival.

At the transactional level, the ability to convert debt into equity will be especially useful as it will reduce interest costs for companies. This is a frequent reason for firms getting into default. In addition to this, reconstruction and revival becomes easier with innovative and quick structuring of the debt component.

These possibilities, including those of changing owners, promoters or managements, will enable ARCs to offer better packages to banks for bad loans.

Now, for the first time there exists a legislative framework that allows ARCs to focus on revival and reconstruction. The efforts will be, or rather should now be, on buying an impaired asset based on business viability, using specialized skills and tools to turn it around and then reselling the stake the moment the company recovers. Apart from making profits for themselves, ARCs will have contributed to the national economy by preventing capital waste.

Haseeb A. Drabu is an economist, and writes on monetary and macroeconomic matters from the perspective of policy and practice. Comments are welcome at haseeb@livemint.com. To read Haseeb A. Drabu’s earlier columns,go towww.livemint.com/methodandmanner-

http://www.livemint.com/Opinion/bsS1xllKPFzCj95WqqoSxN/A-reconstruction-boom.html

Asset reconstruction firms expect boost in business

According to a Bill passed on Monday, these firms can convert part of their debt into shares of defaulting companies.
Dinesh Unnikrishnan 

Updated: Wed, Dec 12 2012. 12 42 AM IST

Mumbai: Asset reconstruction companies (ARCs) that purchase bad loans given to sick units from commercial banks are likely to see a revival in their business, once the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill 2011 comes into effect.

The Bill, passed by the Lok Sabha on Monday, allows ARCs to convert part of the debt into the shares of the defaulting companies and purchase the sticky assets of multi-state cooperative banks, among other things.

The actual implementation of the new rules may not take place immediately as the Bill is yet to be cleared by the Rajya Sabha, the upper house of Parliament, following which the Reserve Bank of India (RBI) will announce detailed guidelines.

Chiefs of leading asset reconstruction companies are optimistic that the provision to convert debt in distressed companies to equity will make such purchases more attractive as equity ownership will give more control to them in the operations of companies besides yielding higher returns once the companies turn profitable.

For companies too, conversion of debt into equity will be beneficial as their interest payment burden will come down.

“It’s indeed a big positive for ARCs,” said P. Rudran, managing director and chief executive officer of Arcil, India’s largest ARC. “This will enable us to do actual reconstruction of businesses for the eligible firms. ARCs will be able to take equity ownership in such companies and exit at a later stage by earning an upside on the equity, when the unit turns profitable.”

Another key provision of the debt recovery Bill allows banks to accept immovable property of defaulting companies to realize claims.

ARCs are currently not allowed to directly pick up stakes in stressed units whose loans they buy from commercial banks or other financial institutions. Instead, they typically facilitate the bringing in of long-term capital to these firms.

According to Rudran of Arcil, the provision to allow banks and financial institutions to file caveats and to be heard in debt recovery tribunals before any stay is granted will ensure that the process of law is not misused by unscrupulous borrowers to delay settlements and payment of dues.

“When you are reviving a running company, you are investing in a sick unit. ARCs always wanted to have equity relationships in companies which have a potential to revive but it was not allowed,” said P.H. Ravikumar, managing director and chief executive officer of Invent Assets Securitisation and Reconstruction Pvt. Ltd. “The new provisions will help ARCs to focus more on reviving the units rather than just buying out the bad assets.”

Ravikumar is optimistic that the provisions in the new law will help Indian ARCs buy more assets and enhance their ability to revive sick units in a slowing economy. Birendra Kumar, chief executive officer of International Asset Reconstruction Co. Pvt. Ltd, said more clarity will come only after the Reserve Bank announces the norms.

Slowing global exports, high inflation and high interest rates have hit the earnings of most industrial units, especially small and medium enterprises, in Asia’s third largest economy. This has impacted the ability of many companies to repay loans to commercial banks.

However, despite the rise in non-performing assets (NPAs), the business of ARCs is not swelling. Even Arcil, the largest among the ARCs, added just Rs.200 crore to its books this fiscal. For the other two ARCs, there have been hardly any deals in the current fiscal. Arcil has assets under management worth Rs.6,200 crore, Invent has bought assets worth Rs.2,500 crore, while International has principal outstanding assets of Rs.4,000-Rs.4,500 crore. Analysts said the business prospects of ARCs look bright in India, given the stress in the economy and the rise of bad loans and restructured assets. Gross NPAs of 40 listed banks rose by 47% to Rs.1.6 trillion in September from Rs.1.1 trillion in the year-ago period, with state-run banks leading the pack.

Analysts expect at least 25-30% of the restructured assets to turn bad in the absence of a major pick up in the economy, which grew at 5.3% in September quarter. Total restructured assets under the so-called corporate debt restructuring mechanism touched Rs.1.9 trillion on a cumulative basis till September. “It is boom time for ARCs, given the rise in bad loans in the banking system,” said Abhishek Kothari, research analyst at Violet Arch Securities Ltd.

“Post the new regulations, there is a likelihood of more bad loans being sold to ARCs as they will be keen to take equity relationships, which will reward them at a later stage, when valuations go up.”

http://www.livemint.com/Politics/xtLcRxhvhTqpwySmiABmYM/Asset-reconstruction-firms-expect-boost-in-business.html

Foreign investment limit in ARCs raised to 74%. The finance ministry said that 74% would be the combined investment limit for FDIs and FIIs

Asit Ranjan Mishra 

New Delhi: A day after allowing asset reconstruction companies (ARCs) to take equity stakes in bad assets of banks through amendment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in Parliament, the government on Friday raised foreign investment limit in ARCs to 74% from 49% at present.

The proposal is considered critical to boost the asset reconstruction business in India at a time when bad loans in the banking system have been on the rise in a slowing economy. Gross non-performing assets (NPAs) in the banking system were around 3.5% of the total assets at the end of the first half of this fiscal, according to government estimates. Cumulatively, banks restructured Rs.1.9 trillion of loans till September.

In a press statement, the finance ministry said 74% would be the combined limit for foreign direct investors (FDIs) and foreign institutional investors (FIIs), removing the prohibition on FIIs investing in ARCs. “The total shareholding of an individual FII shall not exceed 10% of the total paid-up capital,” it added.

A single sponsor will not be allowed to hold more than 50% of the shareholding in an ARC either by way of FDI or FII. “The foreign investment in ARCs would need to comply with the FDI policy in terms of entry route conditionality and sectoral caps,” the statement said.

S.C. Bhatia, chief executive officer of Phoenix ARC, said the move is is more of an enabler and it will take time to produce results. “Unless banks are incentivised to sell (bad loans) to ARCs, I don’t see a flood of equity coming into ARCs,” he said.

There are several regulatory restrictions imposed by the Reserve Bank of India on the source of funding that ARCs can tap. Out of the available sources, banks, notified financial institutions and non-banking financial companies do not lend much to ARCs. Another source of liquidity for ARCs could have been domestic funds, but there are a very few in India focused on distressed assets. Since foreign investors are minority shareholders at present, they don’t take an active part in the revival of assets.

Typically, ARCs set up separate trusts to acquire individual assets. These trusts issue security receipts (SRs) against the bad assets bought. The SRs are bought by banks themselves as qualified institutional buyers, or QIBs, as well as other investors. Under the current laws, banks can undertake corporate debt restructuring and convert some of the debt into equity according to prescribed guidelines. But no such option was available for asset reconstruction companies (ARCs). They acquire bad debts from banks and other lenders at a discount and then try to recover them, earning a fee.

Through the amendment of the SARFAESI Act by passing the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011 in Parliament, the government allowed ARCs to take equity interest in such bad debts.

The finance ministry also increased the limit of FII investment in SRs from 49% to 74%. It has also done away with the individual limit of 10% for investment of a single FII in each tranche of SRs issued by ARCs. “Such investment should be within the FII limit on corporate bonds prescribed from time to time, and sectoral caps under the extant FDI regulations should be complied with,” it added.

http://www.livemint.com/Politics/xZNSZVtOkqUHUAyHuklgwO/Foreign-investment-limit-in-ARCs-raised-to-74.html

Bank auction buyers cannot file writ petitions seeking refund: HC

MOHAMED IMRANULLAH S.

Dismisses case seeking refund of Rs. 4.25 lakh from Canara Bank

Purchasers of immovable properties in auctions conducted by nationalised banks cannot file writ petitions seeking refund of their money, on account of certain encumbrances in the properties, as such transactions are purely commercial in nature, the Madras High Court Bench here has held.

Justice K. Chandru passed the ruling while dismissing a writ petition filed by an individual seeking a direction to the Chief Manager of Canara Bank, Melur Branch, Tuticorin, to refund Rs. 4.25 lakh with interest from November 8, 2011, as the property he purchased could not be registered in his name.

According to the petitioner, E. Muthuraj of Tuticorin, he purchased 10.107 cents of land at Sankaraperi village through an auction conducted by the bank. He paid the entire sale consideration to the bank and also obtained a sale certificate issued in his favour.

Subsequently, when he attempted to register the property in his name, the Sub-Registrar concerned informed the writ petitioner that the property actually belonged to the government and no sale deed could be registered with respect to it in favour of a third party.

An application made by him under the Right to Information Act, 2005, to the District Registrar Office revealed that the land was part of Boodhan Movement, initiated by Acharya Vinoba Bhave in 1950s for the benefit of landless poor, and it stood in the name of the State government’s Boodhan Board.

However, in a counter affidavit filed by the bank through its counsel C. Jawahar Ravindran, it was stated that the property was taken charge of under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act from one of its loan defaulters.

When the property documents were submitted as security by the borrower, the bank’s panel of legal experts had opined that the mortgagor had a valid title over it. Stating that the bank was unaware of the encumbrance, it rejected any kind of liability to repay the amount to the auction purchaser.

Further, the bank relied upon Rule 15 (3) of the Tamil Nadu Boodhan Yagna Rules, 1959, which permits mortgaging of property belonging to Boodhan Board. It also pointed out that the sale certificate issued in favour of the purchaser was exempted from being registered under the Registration Act.

After recording the contentions put forth by the petitioner as well as the bank, Mr. Justice Chandru recalled that in a judgement passed on September 12, a Division Bench of the High Court had held that it was the purchasers who must be diligent enough in enquiring about the encumbrances before purchasing properties through bank auctions.

Pointing out that statutory rules provide for sale of a property only after 30 days of a public notice issued by banks, the Division Bench said that the time was intended to serve two purposes:

One for the bank’s loan defaulter to gather resources and repay the money if possible and another for all intending purchasers to make sufficient enquiries as a person of normal diligence and ordinary prudence would do while buying an immovable property.

http://www.thehindu.com/news/cities/Madurai/bank-auction-buyers-cannot-file-writ-petitions-seeking-refund-hc/article4105979.ece

Private Treaty under SARFEASI act

In the event the authorised officer intends to sell the secured asset by the above two methods by fixing the reserve price and if he fails to obtain a price higher than the reserve price, he shall effect the sale at such price which is consented by the borrower in terms of the second proviso to Rule 9(2) of the Rules. The authorised officer has two options. In the event the authorised officer fails to obtain a price higher than the reserve price and in the event the consent of the borrower is obtained, he can sell the secured asset at such price for which the borrower has consented by following the procedure enumerated in sub-rule (5)(b) and (c) as well as sub-rule (6) of Rule 8. The consequential question would be in the event the consent of the borrower could not be obtained, namely, when the borrower refuses to give consent, what would be the procedure to be adopted by the authorised officer? In the event no consent could be obtained, he cannot resort to sell the property either by obtaining quotations or by private treaty and has no other option except to resort to sale by public tenders or public auction. In this context, a reference also can be made to the first proviso to Rule 9(2) of the Rules providing that no sale under the rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of Rule 9. Only for that reason, the second proviso requiring the consent of the borrower has been made. This issue will be considered in point no.(3). As far as the first question is concerned, in the event the authorised officer fails to obtain a price higher than the reserve price, he cannot sell the secured asset for a lesser price than the reserve price without the consent of the borrower. The said issue came up for consideration before a Division Bench of this Court in K.Raamaselvamand others v. Indian Overseas Bank, Aminjikarai Branch and another, AIR 2010 Madras 93, where the Division Bench held as follows:-

"12....It is crystal clear from the present stand taken by the borrower that there is no consent for confirmation of such sale. As a matter of fact, the Authorised Officer has never bothered to find out from the borrower whether he was willing that the sale should be confirmed, despite the fact that the Authorised Officer had failed to obtain a price higher than the reserve price.

14. We do not think that in view of the clear language in the second proviso, such a contention can ever be countenanced. In fact, the first and second provisos contemplate the situation that if the bid amount is less than the reserve price, such a position is covered by the first proviso and if the bid amount is more than the reserve price, the situation is contemplated in the main provision. However, if the Authorized Officer fails to obtain the price higher than the reserve price, with the consent of the borrower, the sale may be confirmed only after the borrower and the secured creditor give their consent. By no stretch of imagination, it could be construed that even if the Authorised Officer fails to obtain price higher than the reserve price, he may, confirm the sale without obtaining any consent from the borrower or from the secured creditor."

What if the borrower fails to give consent?

21. Point No.(3): This question relates to a situation when the borrower refuses to give consent to the authorised officer to sell the secured asset for less than the reserve price and the authorised officer decides to sell the secured asset by private treaty. The power of the authorised officer to sell the secured asset by private treaty is beyond dispute, as it is one of the methods contemplated for sale of immovable property in terms of Rule 8(5) of the Rules. However, in the event the authorised officer decides to sell the secured asset by private treaty, such sale should be strictly in conformity with Rule 8(8) of the Rules. The said sub-rule states that “sale by any methods other than public auction or public tender, shall be on such terms as may be settled between the parties in writing”. When this rule mentions the sale by any methods other than public auction or public tender, it conveys two things, namely, in the event the sale is made through public auction or public tender in terms of Rule 8(5)(b) and (c), the provisions of sub-rules (6) and (7) of Rule 8 would be attracted. In the case of any other sale, the provisions of Rule 8(5)(a) & (d) would alone be attracted. As a consequence, a sale by private treaty must be on such terms as between the parties in writing. The word “parties” came up for consideration before a Division Bench of this Court-Madurai Bench in J.RajivSubramanian and another v. M/s Pandiyas and others, AIR 2012 Madras 12, where the Division Bench held as follows:-

“33. The first question for our consideration is as to what are the formalities to be adopted when invoking private treaty and effecting a sale on that basis. In this connection, it would be worthwhile to refer to Rule 8(5) of the Security Interest (Enforcement) Rules, 2000 which reads thus:

"5. Before effecting the sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:

a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or

b) by inviting tenders from the public;

c) by holding public auction; or

d) by private treaty."

As per the private treaty, other than public auction or public tender, it can be settled between the parties invoking as per Rule 8(8) of the Security Interest (Enforcement) Rules, 2002. The sale of properties by private treaty is also permissible in law. The only condition is that it shall be on such terms as settled between all the parties in writing. From this, it is clear that the presence of debtor and his willingness in writing are essential.”

New Sarfaesi to break loan pricing deadlock

Published: Friday, Dec 14, 2012, 1:58 IST 
By Megha Mandavia & Aswathy Varughese | Place: Mumbai | Agency: DNA

Revival of financially sick businesses has just become easier. For, the long-standing deadlock between banks with bad loans to sell and asset reconstruction companies (ARCs) over pricing issues may end finally.

This week’s amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) now allow ARCs to convert defaulting company’s debt into equity.

Asset Reconstruction Company (India) Ltd or Arcil, India’s biggest ARC, said it may now be able to offer better deals to banks for bad loans. 
R K Bansal (pictured), executive director of IDBI Bank, said other ARCs may follow suit. “They can now pay a better price to banks to buy ailing assets as they will now have more wherewithal to recover their dues.”
The ARC sector has been asset-starved for the past two years. Banks had been expecting higher prices for their bad loans than what ARCs were ready to offer. 
Arcil’s MD and CEO P Rudran said, “At the due diligence stage, we won’t decide on pricing. But, if we are able to assess the value (of the non-performing asset or bad loan concerned), then, perhaps, we would be able to pay a little more. We may reduce the discount. Revivals will focus onbusiness viability. We will help as per the requirements of the ailing company concerned. We will resell the stake the moment such a company recovers.”
But some doubt if everything would be hunky dory for ARCs now. P H Ravikumar, MD and CEO of Invent Assets Securitisation and Reconstruction, for one, said acquisition of bad loans from banks still remains a challenge. 
“More than the pricing issue, the deadlock lies in banks’ under-provisioning for bad loans. If a non-performing asset is under-provided, it will reflect in the price at which banks are willing to give ARCs the bad loans,” said Ravikumar. 
megha.mandavia@dnaindia.net , aswathy.rachel@dnaindia.net

http://www.dnaindia.com/money/report_new-sarfaesi-to-break-loan-pricing-deadlock_1777355

NPA recovery Bill won’t shake things up

Published: Friday, Dec 14, 2012, 2:08 IST 
By Megha Mandavia | Place: Mumbai | Agency: DNA

The pain of bad loans does not seem to be going away anytime soon. A new amendment passed by the Lok Sabha on Monday making auctioning of borrower security easier may not actually translate into any substantial or even immediate reduction in these loans for public sector banks.

The key provision in the new Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) now allows banks to bid for the unrealised security against the value of non-performing assets (NPA) if it is unable to secure a decent value of the assets at the auction. This will help banks offset outstanding NPAs against the ‘realisation’ and sell them later at a better price.

“It certainly helps because many auctions don’t go through due to cartelisation by bidders and legal issues. But the impact will not be substantial on non-performing assets because every time we don’t have that much collateral to sell,” pointed out BA Prabhakar, chairman and managing director at Andhra Bank.

PSU banks are plagued by rising levels of non-performing assets with a slowing economy and loose lending norms. Gross NPA levels at all listed banks in the quarter ended September on an average stood close to 3%, which are expected to go up to as much as 4.5% in the next one year.

The recent changes will no doubt hasten the recovery process, but a substantial impact on bad loans will not be visible, bankers and analysts said. “We don’t see this as a material change – the difference is largely optical and it is likely that the market will see through these cosmetic accounting changes,” said Seshadri Sen, an analyst with JP Morgan. “Our negative view on PSU banks is underpinned by expectations of continued momentum in incremental delinquency, a view that remains unchanged.”

Large public sector banks are continuing to lend aggressively to stressed sectors such as real estate, iron and steel, textiles, infra and agriculture, thus increasing the risk factor in the banking system, even though bankers are tracking recoveries on a daily basis now.

“The amendment will definitely help increase recoveries, but won’t reduce the NPAs immediately. The change will happen only over a period of time. All these changes are just enablers which help us put more pressure on willful defaulters,” said RK Bansal, executive director with IDBI Bank.

http://www.dnaindia.com/money/report_npa-recovery-bill-wont-shake-things-up_1777362

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Asset quality of banks a serious cause for concern

For public sector banks, the situation appears to have taken a particularly dire turn since the quarter ended June 2011. The author is Director, Crisil Research, a division of Crisil.

The current economic downturn is proving to be a testing time for banks, with asset quality concerns coming sharply to the fore yet again. The gross non-performing assets (GNPAs) of banks was 2.9 per cent as at the end of March 2012. Critically restructured assets and NPAs, which have surged sharply in the past year and a half, will rise further in 2012-13 and aggravate asset quality concerns in the banking system.

The worries over asset quality are more so in the case of public sector banks (PSBs) which account for around 80 per cent of the banking credit. The difference between PSBs and private banks is starkly evident when one looks at absolute numbers.

During 2011-12, GNPAs of PSBs grew by Rs.39,000 crore compared to only Rs.500 crore in the case of private banks. For private banks, this enormous difference is a reflection of better credit underwriting norms, recoveries and upgradations.

In addition to the worsening macro-economic scenario, factors that drove this marked deterioration in asset quality of PSBs during 2011-12 include sharp upward movement in interest rates, volatile currency and commodity markets, and the adoption of a system-based NPA recognition that caused a sudden spike in GNPAs from the small retail and agri-based portfolio. The major sectors that fuelled this rising trend in NPAs are real estate, textile, aviation and infrastructure (specifically, power and telecom segments), in addition to priority sector loans.

For PSBs, the situation appears to have taken a particularly dire turn since the June 2011 quarter. As the accompanying chart shows, restructured assets, as a percentage of advances, were over 7 per cent at the end of the June 2012 quarter compared with 4.8 per cent as of June 2011.

More importantly, what stands out in loan restructuring this time when compared with 2008-09 and 2009-10 is that it is not just small borrowers who are facing problems with loan repayments, but large corporates as well. In the present phase, over two-thirds of the loans restructured (until December 2011) had a ticket size of over Rs.1,000 crore.

This qualitative change is also indicated by a fairly sharp increase in the number of corporate debt restructuring (CDR) cases.

From 59 in the 12 months ended June 2011, the number of cases referred to CDR increased to 110 in 12 months ended June 2012, and the corresponding amount of loan referred has shot up to Rs.83,800 crore from Rs.24,600 crore.

Infrastructure, telecom, ship-breaking, iron and steel and construction account for around 70 per cent of the loans referred to CDR during the 12 months ended June 2012.

The large quantum of restructuring is also a reflection of the prevailing stress on corporate India’s credit quality because of lower profitability, weak demand and tight liquidity.

Asset quality will deteriorate further if restructured accounts slip into the GNPA category. And indications are that this is already happening. As of March 2012, close to 14 per cent of restructured advances for 14 PSBs (together accounting for around 65 per cent of advances) were classified as GNPA, up from around 11 per cent as of March 2011.

It is evident that both profitability and capital adequacy of PSBs will be severely hit if a significant proportion of the restructured assets turn out to be non-performing assets. With India’s GDP growth in 2012-13 expected to slip to 5.5 per cent from 6.9 per cent in 2011-12 and the global economic situation still seeming extremely fragile, the risk of slippages appears highly plausible.

Gross NPAs of the banking system as a percentage of advances are, therefore, likely to touch 3.5 per cent by March 2013.

At the moment, the comfortable capital position in the banking system acts as a buffer to these risks. In particular, credit risk profiles of many PSBs are underpinned by expectations of continued support from the Central Government.

Nevertheless, in the short run, closer monitoring of restructured accounts to prevent slippages and sale of some non-performing assets would help in conserving capital.

http://www.thehindu.com/business/Economy/article3758412.ece

Q1 - Banks are showing profit but Bad loans are hurting the performance ...

The first quarter of F.I 12-13 has ended on June 30,2012.

So far Indian Overseas Bank (IOB), Punjab National Bank (PNB), Union Bank of india (UBI),Bank of India (BOI), Dena Bank, Central Bank of India (CBI) , Axis Bank, Tamilnad Mercantile Bank, Corporation Bank and Vijaya bank have all reported an increase in net profit. However due to increases in bad loans and provisioning for NPAs (non-performing assets) the banks are reporting subdued profits.

Indian Overseas Bank has reported a net profit of 13.5%, PNB has reported a net profit of 12.7%, UBI has reported a net profit of 14.6%, BOI has reported a net profit of 71%, Axis Bank has reported a net profit of 22%, Tamilnad Mercantile Bank has reported a net profit of 79%, Corporation Bank has reported a net profit of 5.35%, Vijaya Bank has reported a net profit of 54%,. Dena Bank has reported a net profit of 42% and Central Bank has reported a net profit of 19.65%.

Update.



ICICI bank has reported a 36% increase in profit for the first quarter of  this year and its gross NPA's came down to 3.54% compared to 4.36 at the end of the first quarter of last year.

UCO Bannk has reported a profit of 24% rise in net profit. White the gross NPA's grew to 3.88% from last years first quarter gross NPA's of 3.50%

How to buy property in an auction

Anand Kalyanaraman

Tight timelines in the auction process necessitate deep pockets.

Do you yearn to buy a house in the city but find realty rates prohibitive? You could try bidding for properties being auctioned by banks. The laws allow banks to recover dues from defaulting borrowers by auctioning the properties they pledged.

Banks may fix the reserve price (minimum price at which the property will be sold) for such properties 20-25 per cent lower than the going market rate. This could translate into a bargain buy for bidders. Also, since they are auctioned by banks, the title to these properties would likely be clear.

Deep pockets needed

The auction process, however, has tight timelines within which the buyer needs to arrange the money to close the deal. So, this requires that you have deep pockets. Banks issue a public notice in newspapers about the proposed auction and invite bids.

The notice includes the details of the property, date, time and venue of the auction, reserve price, and earnest money deposit.

It also mentions the date on which interested parties can inspect the property before submitting their bids. Bidders must submit their applications to the bank quoting their bid amount which should not be less than the reserve price. Along with this, they must pay earnest money deposit which may be around 10 per cent of the reserve price.

The auction usually takes place after 30 days from the date of the public notice. In this period, the borrower may still pay the money due to the bank.

If the borrower settles the dues, the auction will not happen and your earnest money deposit will be returned. If the auction takes place and you do not win the bid, your earnest money deposit is returned. If you win the bid, you will have to pay around 25 per cent of the bid price (less the earnest money deposit) on the day of the auction. You need to pay the balance amount within the next 15 days or an extended period agreed between you and the bank.

If you win the bid but do not pay the required amount within the specified periods, you will lose the money paid earlier. So, walk this path only if you have got the funds ready to go the whole way. Banks may offer loans to acquire such properties. But given the tight timelines, you will have to make arrangements for a loan before the auction date.

Online or offline?

Buying property through the auction route involves effort. You will need to scan newspapers for announcements by banks regarding such auctions, do the necessary due diligence, and organise the funds quickly. Else, you can contact real estate agents who may have this information. Also, Web sites such as www.foreclosureindia.com provide online listings of properties which banks advertise to auction.In a normal (offline) property auction, bidders gather at the auction venue where their bids are considered. Banks may also allow competitive bidding among the bidders for improving their offers.

In online property auctions, the process is largely similar, but bidders place and revise their bids on a Web site. The online auction method has not yet been much successful in India. Observers attribute this to fears of online fraud, risk of manipulation by cartels, and lack of awareness among bidders.

What to watch out for

Despite the benefits, acquiring property through the auction route may not be everyone’s cup of tea. If the auction attracts aggressive bids, the price could go up and dilute the cost advantage. So, it is important that you make an assessment of the market value and bid prudently to get a good deal. Also, to be on the safer side, it is better to check the property documents before deciding to bid, or engage a lawyer to verify the title.

This apart, keep in mind that banks auction property on an ‘as-is-where is’, ‘as-is what-is’ basis.

This means that expenses on any repairs, renovation, unpaid property taxes, electricity dues and statutory liabilities will have to be borne by the buyer. The buyer also has to bear other expenses such as stamp duty and registration fees. So, do a proper inspection to assess the true cost of owning the property.

Besides, some people consider auctioned property unlucky, and have misgivings about buying something the owner does not willingly sell. This could be a reason why such properties may be priced at a discount to market rates.

anandk@thehindu.co.in

http://www.thehindubusinessline.com/features/investment-world/article3613659.ece?homepage=true&ref=wl_home 

 

Help to speed up NPA recovery, Pranab tells DRT chiefs

 SPECIAL CORRESPONDENT, THE HINDU

Problem of increasing NPAs has to be addressed on a priority basis.

                   

Finance Minister Pranab Mukherjee, on Wednesday, asked chiefs of debt recovery and appellate tribunals to suggest ways and means of expediting the release of bank resources locked up in the form of NPAs (non-performing assets). 

Addressing the first conference of chairpersons of DRATs (debt recovery appellate tribunals) and presiding officers of DRTs (debt recovery tribunals) here, Mr. Mukherjee pointed out that there could be no fresh lending unless there was recovery of earlier loans and, therefore, the problem of increasing NPAs of banks had to be addressed on a priority basis.

Even as the government has advised banks to closely monitor their NPAs, Mr. Mukherjee argued that the role of DRTs was all the more important as they were the part of mechanism for recovery of loss of assets by banks by way of bad loans.

Asking the tribunal chiefs to come out with ‘concrete suggestions' to improve their functioning and help in speedier recovery of bank debts, Mr. Mukherjee noted that the conference was being held at a time when the Indian economy was faced with various challenges.

In the event, although the slowdown in the GDP growth rate, coupled with the widening fiscal and current account deficits were a matter of concern, there “is no need to press the panic button as he has full faith in the capacity and abilities of our people as well as in the resilience of the Indian economy to overcome successfully such challenges.”

Highlighting the positive aspects of the economy, Mr. Mukherjee asserted that with strong basic fundamentals and high rate of domestic savings and investment, along with a reversal in the tight monetary policy, among others, taking the economy back to the path of higher growth, maintaining a moderate rate of inflation, narrowing the current account deficit and restricting the fiscal deficit to two per cent of GDP were much achievable.

The Finance Minister also argued that it was on account of the well-placed regulatory mechanism and effective functioning that banks were not adversely affected by the international financial crisis.

On the contrary, the role of banks was such that they helped in minimising the impact on the economy. In such a scenario, the role of DRTs “is all the more important in helping out the banks to deal with mounting NPAs/loss assets,” as DRTs could ensure effective and speedy recovery of public money.

Keeping this important aspect in view, as per the relevant legislation on recovery of dues, the endeavour of tribunals should be to decide cases in 180 days, but the DRTs had not been able to adhere to this time line. Mr. Mukherjee said the pendency of cases in tribunals was about 67,000 cases, involving an amount of Rs. 1.36 lakh crore as on March 31, 2012. “This is a matter of great concern,” he said.

http://www.thehindu.com/business/article3498324.ece?homepage=true

Take over of Management of An Engineering Institute.

Yerneni Bhargav, Managing Partner, Foreclosureindia.com


Hyderabad :  SARFEASI Act ,section 13 (4) (b) specifies that " Take over the management of the business of the Borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: One of the Public sector Bank has issued a Lease /Sale Notice for Take over of the Management of an Engineering Institute. The notice is published below for information.

      All the Borrowers of the Banks and Financial Institutions shall be vigilant about their loans to safe guard their management control of their businesses.

Be vigilant on NPAs, Pranab tells PSBs

                                  
Banks asked to promote electronic mode of transactions

Finance Minister Pranab Mukherjee, on Tuesday, directed public sector banks (PSBs) to keep up the momentum of bringing down their non-performing assets (NPAs) and be vigilant in this regard to ensure sound financial health of the country's banking system.

Lauding the PSBs for reduction in gross NPAs from the level of 3.18 per cent in December, 2011, to 3.10 per cent in March this year, Mr. Mukherjee said: “I am happy that banks have taken up the challenge to reduce NPA's ...This momentum now has to be kept up and timely action in this direction would ensure sound financial health of the banking sector.”

Addressing chief executives of PSBs and financial institutions at a meeting for performance review of last fiscal, the Finance Minister expressed satisfaction over the banks ‘very proactively' responding to measures aimed at avoiding NPAs and pointed to recent decisions on restructuring of loans extended to textile units and distribution companies (discoms) in the power sector as good examples of NPA management. “I urge you to deploy various tools at your command for containing and rolling back NPAs in accordance with the guidelines of the Reserve Bank of India,” he said.

As a proactive step to help these sectors, which are under stress owing to the economic slowdown, bank loans totalling about Rs.1.30 lakh crore to discoms and Rs.35,000 crore to the textile units are in the process of being restructured so that these sectors can obtain fresh loans.

Reviewing the performance of the lending companies during the fiscal, Mr. Mukherjee drew satisfaction from the fact that while PSB deposits grew by 14.4 per cent to over Rs.50 lakh crore in 2011-12, advances also went up by 17.7 per cent to over Rs.40 lakh crore on a year-on-year basis. Alongside, the banks' net profits rose from Rs.44,900 crore to over Rs.49,500 crore during the year even in the wake of a difficult economic scenario. As for credit to the farm sector, the PSBs had been set a target of Rs.5.75 lakh crore for 2012-13, which is achievable as loans to the sector exceeded Rs.5 lakh crore during the previous fiscal year.

For the current fiscal, the Finance Minister has asked the PSBs to pay special attention to ensuring that every farmer household receives a Kisan Credit Card and existing accounts are quickly replaced by debit cards under the new scheme.

While asking the RRBs (regional rural banks) to undertake coordinated branch expansion with their sponsor banks and start rolling out of ATMs and issuance of credit cards, Mr. Mukherjee also told the PSB chiefs to promote electronic mode of transactions over other modes. “They should examine the possibility of making NEFT transactions up to Rs.1 lakh free of charges, as has been done by Oriental Bank of Commerce,” he said.

In this regard, he asked the Reserve Bank of India (RBI) to proactively work on this front and ensure that all electronic banking transactions are made possible without any charges being levied. “The use of debit cards to the point of sale without any transaction charges at least for micro and small transactions should be our next objective,” he said. 

How to buy or sell a house against which loan is outstanding

Amit Shanbaug, ET Bureau Jun 11, 2012, 09.19AM IST

The buyer will also demand the copies of stamp duty and registered house documents. Since these papers will be mortgaged with the bank if you have taken a home loan, you can use a photocopy of the required documents to initiate a deal. Depending on the kind of property and ownership, some more documents, such as a no-objection certificate from the housing society and a documented consent in case of jointly owned property, may be required.

If a buyer pays with own funds

In case, the potential buyer plans to pay for the property through his own savings and does not want to take a home loan, the procedure is pretty straightforward.

However, with the steep increase in home loan interest rates, Khan is finding it difficult to service both the loans and plans to sell one property. "The profits generated from the sale of one house can be used to pay the loan for the other," he says.

Financial insecurity is just one of the reasons a property owner may want to sell a house for which he is still paying the EMIs. A couple of years after buying the house, you may realise the need to upgrade to a bigger property because your needs have increased.

Some buyers also prefer shifting to a better location within the same city either because it offers better infrastructure or is closer to their workplace or their children's school. If you are moving to a different city for work, you may want to settle down there after disposing of the existing property.

While these arguments are valid for a seller of a mortgaged property, it may also make sense to buy a mortgaged resale property rather than one that is under construction. The advantage of purchasing a resale property is that it may be at a better and established location and you will be dealing with an individual instead of a builder's sales team.

"When a buyer approaches a developer, the salespersons use all kinds of pressure tactics to ensure a quick sale and the buyer doesn't get a chance to conduct due diligence," says Sandeep Sadh, chief executive officer of Mumbaiproperty.com, a Mumbai-based real estate portal. In the case of a resale property, you have ample time to examine the pros and cons of the deal before taking a decision.

Another advantage with buying a resale property is that banks generally conduct due diligence for the house that they are going to finance. "So if you are planning to buy a mortgaged property, rest assured that it has got all the necessary approvals by the relevant authorities," says Sadh.

Nanda bought a 2-BHK house in Thane, in 2009, for Rs 35 lakh. The seller had an outstanding loan of Rs 5 lakh.

How he settled the loan

Nanda made a down payment of Rs 12 lakh. The seller used a part of it to prepay the outstanding loan amount and got the original documents from the bank.

Nanda had a preapproved loan, and after registering the property in his name, he got the loan processed in 10 days to pay the remaining amount.

"I got a good deal on the property as the seller was in a hurry and was not finding enough buyers because of the outstanding loan."

While the reasons for selling and buying a mortgaged property may vary, one common problem that most people face is the lack of clarity on how to buy or sell a property that is mortgaged to the bank. Can you sell a mortgaged property at all? Do you need to settle the home loan first and then approach a buyer or can the buyer take over your loan? What if the buyer himself plans to take a loan to fund the purchase?

Many property owners who have bought the house with money borrowed from a bank have grappled with these questions. "I still have to repay a sizeable portion of the principal back to the bank before I can get the original papers," says Khan, whose house is mortgaged with a leading public sector bank.

 Khan plans to sell his 2-BHK house at Goregaon, for which he has an outstanding loan of Rs 19 lakh. He has purchased another house through a bank loan and is finding it difficult to process both. So, he has decided to sell one.

How he plans to settle the loan

The potential buyer has agreed to pay him a lump sum. Once the original documents are released by Khan's bank, the buyer will apply for a housing loan when the documents are cleared by his bank. "I have a copy of all the original property documents. The potential buyer can get it verified with the bank as well."

To avoid confusion while finalising a deal, here's how you can sell (or buy) a house against which a loan is outstanding.

Get the property documents in order

Before you approach a buyer for selling the property or talk to your bank for settling the outstanding home loan, get the paperwork in order. The main documents required to sell a residential property are the housing society share certificate and the sale/ purchase deed of the property.

The sale deed confirms that the land is in the name of the seller and that he has the right to dispose it of. If the property has changed hands more than once, the buyer may also ask for a copy of the previous deeds, in order to confirm the authenticity of the deal and property.

The seller first needs to obtain a letter from the bank with which the property is mortgaged, stating that the bank agrees to relinquish the property documents after the full and final payment of the loan. The buyer will then be required to pay an amount equivalent to the outstanding loan to the seller's housing loan account, after which the process of releasing the documents by the bank is initiated.

The time given to the seller to make the payment can be worked out between the seller and bank. The bank specifies a date by which the seller must make the full payment. If the money is not transferred to the loan account by the due date, the bank can extend the date and charge a penalty or premium over and above his outstanding principal.

"Though the prepayment penalties have been done away with, the seller incurs additional cost by way of a premium that's besides the outstanding amount if the remaining sum is not paid to the bank by the prescribed due date," says Om Ahuja, CEO, residential services, Jones Lang LaSalle India. This additional amount is usually decided by the bank before the fixing of the due date.

Once the borrower pays off all the dues, he receives the 'no due' letter from the bank. This document certifies that there are no outstanding dues on the housing loan to be paid. The original documents kept with the bank as security are usually released over a period of 5-10 working days of receiving the money.

However, at any point of time, a borrower should have a photocopy of all the documents he has submitted to the bank at the time of loan application.

Ramesh Bhojwani, a Mumbai-based financial expert, explains that the sale proceeds cannot be fully executed till the time you are servicing a housing loan. "You can't sell a mortgaged house if the buyer insists on the documents required to apply for a loan because all the original papers are lying with the bank," he points out. Therefore, the amount paid to the bank to release the documents should also be a part of the purchase agreement.

Are there any tax implications either for the buyer or seller if the amount is paid as a lump sum? Hiten Shah, associate director, tax and regulatory practice, Ernst & Young, explains that there will be no tax implication for the buyer since this payment is part of his total purchase price.

"The lump-sum payment made by the seller will not have any impact on his cost of acquisition. However, the interest paid on the loan can be claimed as deduction under income from house property and a deduction for principal repayment can be made under Section 80C of the Income Tax Act," explains Shah.

If the buyer takes a home loan

If the buyer plans to take a home loan to fund the purchase of the mortgaged house, the seller will still be required to settle his home loan first. The loan cannot simply be transferred from the seller to the buyer. "Even if the buyer is taking a housing loan from the same bank where the seller has mortgaged the property, the bank will insist on first closing the earlier loan before starting a new one," says Bhojwani.

So, essentially, a buyer buys a mortgage-free property since the process for the home loan of the buyer is initiated only after the previous loan has been cleared.

The buyer of the property will have to submit all his financial documents to the bank and once the bank is fully satisfied about his repayment capacity, he will be eligible for the new loan. This route requires the entire loan process to be repeated, along with all the implied documentation submissions and approvals. This also means that the standard cost of processing a new loan application will be applicable.

"The bank, at its discretion, may waive some charges, but generally legal, administration and processing charges are levied by the bank. Besides, the rate of interest on the loan will be the one existing at that time, not the earlier one," says Bhojwani.

Experts advise that it is better to take a housing loan from the same bank where the seller has mortgaged the property as the bank will just have to examine the buyer's financial eligibility before furnishing the loan. "The process will be faster since all the property documents are already with the bank," says Bhojwani.

Tax implications

While selling or buying a mortgaged property is possible, selling a property within a couple of years of buying it can pare down your actual profit by half (see graphic). "If the seller is disposing of his property before the mandatory three-year limit, he will incur short-term capital gains tax regardless of whether the sale proceeds are being invested in a new property or not," says Ahuja of Jones Lang LaSalle India.

If you sell a flat within 36 months of buying it, the profit is added to your income for that year and taxed accordingly. If you fall in the highest income tax bracket, the tax rate will be 30.9%. If you have taken a home loan on the property, you will also have to take into account the interest that you have already paid before calculating your actual gains.

Under Section 80C of the Income Tax Act, the principal of the home loan can be claimed as tax deduction. However, if the property is sold within five years of buying, the tax deduction is reversed.

Most investors look at short-term real estate investments the same way and get carried away by stories of friends or colleagues who made lakhs within a year. Before you are inspired to do the same, do your calculations, or better still, stick to your investment for the long term.

If you have held the property for more than three years, the gains are treated as long-term capital gains and taxed at a lower rate. The taxman also gives you the option of using indexation to bring down your tax liability (see graphic).

Inflation indexation takes into account the rise in consumer prices during the time that the investor held an asset and adjusts his buying price accordingly. This lowers the effective profit from the sale of the asset and, therefore, the tax liability. The investor has the choice to pay a flat 10% tax on the capital gain or 20% after indexation.

Is this the right time to sell?

The property market may be flat across most locations, but keep in mind that if you price it right, a resale property can be a better deal for a potential buyer given the advantages of a better location and established infrastructure. Also, keep in mind that what is true for city limits in Mumbai or central Delhi may not be true for the location where you have your property.

Residential property market is very location-specific and may change even from one locality to another. So take a decision only after you are sure of the market conditions in the location. A Visit to a couple of property brokers will give you a sense of the situation.

Whether you sell your house now will also depend on your need for money. Remember, property is an investment that should not be liquidated in a hurry if you are not in urgent need of funds. Getting the best deal may sometimes require you to wait patiently to find a buyer or even spend money in adding value to your house before you put it up for sale.

However, keep in mind that the rate of appreciation in property prices over the next couple of years will be much slower.

Another factor that you need to consider before you buy a house is the rental returns from the property. While the prices may fluctuate, the rental revenue represents a source of steady income for the owner.

http://articles.economictimes.indiatimes.com/2012-06-11/news/32175069_1_resale-property-loan-interest-home-loan/3