tag:blogger.com,1999:blog-34689412249189969832024-03-14T01:01:47.241+05:30Foreclosure IndiaA blog following the latest News, Discussions about Foreclosures in India, The SARFAESI Act, The current and future trends of NPA's in India.Bhargavhttp://www.blogger.com/profile/09646950908119968914noreply@blogger.comBlogger159125tag:blogger.com,1999:blog-3468941224918996983.post-126726152928944222013-04-22T17:19:00.000+05:302013-04-22T17:19:29.961+05:30Bank-auctioned homes may be cheaper<b style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 14px; line-height: 24px;">Watch out for any unpaid dues, taxes and society bills the previous owner could have defaulted on</b><br />
<strong style="background-color: white; color: #666666; font-family: Tahoma, Arial, Georgia; font-size: 11px;">Yogini Joglekar | Mumbai </strong><span style="background-color: white; color: #666666; font-family: Tahoma, Arial, Georgia; font-size: 11px;"> </span><strong style="background-color: white; color: #666666; font-family: Tahoma, Arial, Georgia; font-size: 11px;">April 21, 2013</strong><span style="background-color: white; color: #666666; font-family: Tahoma, Arial, Georgia; font-size: 11px;"> Last Updated at 21:27 IST</span><br />
<span style="background-color: white; color: #666666; font-family: Tahoma, Arial, Georgia; font-size: 11px;"><br /></span>
<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Shashi Nair, a Mumbai-based advocate, bought two houses in Chembur and Vasai in 2005 and 2010, respectively, through two different bank auctions. Nair purchased these properties from banks that opted to take recourse under Section 101 and the Debt Recovery Tribunal (DRT) Act.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">The most common Acts under which banks take recourse are the DRT, state-specific Co-operative Housing Societies Act, and the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">The Sarfaesi Act, 2002, allows banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">It helps banks reduce their non-performing assets (NPAs) by adopting such measures for recovery.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">According to NPAsource.com, the net NPAs of 40 listed banks rose to Rs 92,398 crore in December 2012 from Rs 61,558 crore in March 2012. There were about 23,000 registered properties for auction, worth Rs 21,000 crore. Of these, 8,548 residential flats and 1,846 commercial properties are up for auction.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Ram Sangapure, general manager at Central Bank, says, "Most banks today recover their NPAs under the Sarfaesi Act, as it is faster, hassle-free, and empowers banks to do so without the intervention of the court."</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, says, "Usually, houses bought under the Sarfaesi Act are up to 15-30 per cent cheaper than the prevailing rates of homes in that area. This is because demand for such homes is low, as very few people know about this channel and also banks don't stress on a high price as long as they can recover their losses." Buying through this channel saved Nair as much as Rs 8-10 lakh than the prevailing rates in those areas. Valuations of bank-auctioned homes tend to be on the conservative side, as it is a distress sale.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><b style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Properties under Sarfaesi Act</b><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">If the borrower defaults on repayment of his/her home loan for six continuous months, banks give the borrower a 60-day period notice to regularise his repayments. If the borrower fails to do so, banks will issue another 30-day period notice. If the borrower doesn't pay even in this period, his or her loan would be declared an NPA. This is when banks will auction his mortgaged property to recover their loan.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><b style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Bank issues notice about possession</b><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">If the borrower still fails to repay the loan, the bank will take possession of the property that has been kept as mortgage or collateral. The bank can take the help of the police in case the borrower doesn't part with his property. After the property is under its possession, the bank will issue a notice in newspapers. This is when potential buyers should prepare themselves and wait for bank's auction-notice.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><b style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Wait for the auction-notice</b><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">The bank now hires a government-appointed valuer, who will value the property and arrive at a reserve price (RP) or a minimum bid price. It is a price below which the bank is not allowed to sell that property. If the price fetched exceeds the bank's dues, the excess amount is given to the borrower. Only after arriving at the reserve price, will banks advertise auction-notice. They can publish this only in one English and one regional newspaper, 30 days prior to the auction.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Since information about such notices is limited, one can also look at websites like <a href="http://foreclosureindia.com/">foreclosureIndia.com</a> and NPAsource.com. These portals give information about the latest properties that are up for auction by banks. However, to register on NPAsource.com, you will have to shell out Rs 18,000 annually to view some 1,000 NPA notices in a year across India.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><b style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">How to participate in the auction</b><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Interested bidders must submit their bids in a sealed envelope to the bank. Along with the bid, the bidder has to pay 'earnest money deposit'. This deposit is usually 5-10 per cent of the value of the property auctioned. However, this deposit will be refunded in case the bidder doesn't win the bid. Some banks may also charge a nominal fee as tender fees. On the auction day, the sealed envelopes are opened in front of the bidders and the highest bid is announced.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Bidders may or may not get another chance to revise their bids. If the bank has failed at achieving the reserve price, they may postpone the auction or even reduce the valuation of the property. This revision may take another two-three months.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><b style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">What if you win the bid?: </b><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">You have to pay up to 25 per cent of your bid amount within 24 hours to confirm the purchase. The balance amount can be paid in a month or two. This time period given to the buyer varies from banks to banks.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">R K Bansal, executive director (retail banking) at IDBI bank, says, "If the property value is huge, the buyer can negotiate with the bank and discuss the tenure within which he can pay the balance amount. The buyer can also get loan to buy that property, if he has a decent credit score."</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Since the bank had previously lent against the property, there is clarity on property title. However, these properties are sold on an 'as-is' basis, which means the properties are sold just the way it had been possessed.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">"Since the property has been possessed by the banker forcefully, there are chances there may be pending dues or even litigations. For instance, the owner may have some unpaid property taxes, electricity/water bills, society dues and so on. Hence, don't get carried away by the low price of the house, there are chances you may have to pay for such liabilities," says Anshuman Jagtap, advocate at Hariani & Co.</span><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><br style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;" /><span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Banks may or may not have information about such liabilities, so it's best to hire a property lawyer and check for such loop-holes before finalising the deal.</span><br />
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<a href="http://www.business-standard.com/article/pf/bank-auctioned-homes-may-be-cheaper-113042100495_1.html">http://www.business-standard.com/article/pf/bank-auctioned-homes-may-be-cheaper-113042100495_1.html</a>YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-74547402222242082092013-04-09T16:47:00.000+05:302013-04-11T16:30:04.925+05:30Foreclosureindia.Com Started E Auction Services For all Banks In India Thru BankAuctions.IN Portal<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: magenta;"><span style="background-color: white; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">According
to Ministry of Finance, Government of India directives, </span><span style="background-color: white; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"> </span><span style="background-color: white; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">All NPA’s shall be sold through E Auction
only.</span><span style="background-color: white; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"> </span><span style="background-color: white; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">Free foreclosure listing service
provider, <a href="http://foreclosureindia.com/">Foreclosureindia.com</a></span><span style="background-color: white; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"> </span><span style="background-color: white; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">has
started secured portal <a href="http://bankauctions.in/">BankAuctions.IN</a> for providing E auction services to all
Banks, DRT’s to sell NPA’s online. </span></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">Foreclosureindia.com
is the one and only website in India listing the auction properties of all the
banks and financial institutions across India since Nov 2009. It's the first of
its kind internet portal that helps the buyers of property in getting the free
access to all auction property details / free foreclosure listings information
of banks and financial institutions happening in and around 34 major cities of
the country. During the last one year it has achieved its mile stone about
visitors and page views. The details are reported as detailed below.<o:p></o:p></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">No of total visits to the site -
1,343,374<o:p></o:p></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">No of unique visitors - 652,724<o:p></o:p></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">Total number of page views -10,458,830<o:p></o:p></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">Returning visitors -
52.05 %<o:p></o:p></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">Visitors came from -
45554 cities & from 212 countries.<o:p></o:p></span></div>
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<span style="background-color: white;"><span style="font-family: Arial, sans-serif; font-size: small;"><span style="line-height: 115%;">
Average </span></span><span style="font-family: Arial, sans-serif;"><span style="line-height: 18px;">viewer ship</span></span><span style="font-family: Arial, sans-serif; font-size: small;"><span style="line-height: 115%;"> of each auction property listed is 485. Foreclosureindia.com has set a target of 100 %
growth during the present financial year. </span></span></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"><span style="color: magenta;"><br /></span></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"><span style="color: magenta;">The advantages of “<b>e –
publicity</b>” through it are explained
as detailed below. </span><o:p></o:p></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"><span style="color: magenta;"><br /></span></span></div>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="background: white; font-family: "Arial","sans-serif"; font-size: 12.0pt;"><span style="color: red;">Free
access to all visitors, unlike some portals is charging Rs 1050 to 2500
per month to show the auction property details.</span><o:p></o:p></span></li>
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="background: white; font-family: "Arial","sans-serif"; font-size: 12.0pt;"><span style="color: blue;">E
mail alerts are being sent to 49000 plus registered users on daily basis.</span><o:p></o:p></span></li>
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="background: white; font-family: "Arial","sans-serif"; font-size: 12.0pt;"><span style="color: purple;">It
is displaying the Auction properties details in two other real estate
websites also, along with displaying in their portal.</span><o:p></o:p></span></li>
</ol>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif;"><o:p> </o:p></span><span style="background-color: white; font-family: Arial, sans-serif;"> </span><span style="background-color: white; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">According to <a href="http://www.pib.nic.in/newsite/erelease.aspx?relid=93331" target="_blank">Ministry of Finance, Government ofIndia directives</a> All </span><span style="font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">auctions of immovable properties,
under 'The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest (SARFAESI) Act, 2002, <span style="background: white;"> shall be carried out through E
Auction only to ensure a free, fair and transparent process.</span></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"> E – Auctions may eliminate
cartelization and facilitates NRI’s to buy properties online. Foreclosureindia.com’s spokesperson informed
that “they have developed a fully secured </span><span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">online portal for E-Auctions</span><span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"> as <a href="https://www.bankauctions.in./"><span style="color: black; text-decoration: none; text-underline: none;">https://www.BankAuctions.IN</span>.</a> </span><span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">The
complete process from Creation of Events, submission of first round quotes by
bidders, evaluation and final auction will be done online to enable
transparency in transactions, strictly adhering to all the requirements of
Ministry of Finance.</span><span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"> <a href="https://bankauctions.in/home/" target="_blank">https://www.BankAuctions.IN</a> has easy interface to enable all the <a href="https://bankauctions.in/beginners-guide/" target="_blank">investors / bidders </a>with little knowledge
of Computer and internet to participate in these property auctions. It
maintains complete confidentiality & privacy for the bidders and Banks.<o:p></o:p></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"> All
the Debt recovery tribunals are conducting E Auctions to sell secured
assets. A good number of Banks have adapted
to E auctions for selling of some of the NPA’s. <a href="http://foreclosureindia.com/">Foreclosureindia.com</a> has
started secured portal BankAuctions.IN for providing E auction services to all
Banks, DRT’s to sell NPA’s online to Indian Public and non resident Indians
working in different countries. <o:p></o:p></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"> The <a href="http://www.sbhyd.com/" target="_blank">State Bank of Hyderabad</a>, <a href="http://www.chaitanyagodavarigrameenabank.in/" target="_blank">ChaitanyaGodavari Grameena Bank, Guntur</a> and <a href="http://www.apgvbank.in/" target="_blank">Andhra Pradesh Grameena Vikas Bank, Warangal</a>
has empaneled <a href="https://bankauctions.in/home/" target="_blank">BankAuctions.IN </a>for conducting E Auctions. More than 10 public
sector Banks & private sector Banks are processing their empanelment
requests for conducting E auctions. It
targets to conduct 6000 E Auctions of NPA’s during this year.<o:p></o:p></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"><br /></span></div>
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<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;"><span style="color: magenta;">The
advantages of conducting E auctions through </span><b><span style="color: blue;">BankAuction.IN</span></b><span style="color: magenta;"> are explained as
detailed below.</span><o:p></o:p></span></div>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="background: white; font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%;"><span style="color: blue;">Success
rate of selling of properties will be more, as BankAuctions.IN is
providing wide publicity to NPA properties. Others are only conducting E auction.</span><o:p></o:p></span></li>
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="background: white; font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%;"><span style="color: red;">Price
for conducting E auction is lowest
when compared to all other service providers.</span><o:p></o:p></span></li>
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="background: white; font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%;"><span style="color: #274e13;">Non
performing assets disposal is the only exclusive activity for BankAuctions.IN,
where as it is non core activity for other E Auction service providers.</span><o:p></o:p></span></li>
</ol>
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<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 4.5pt;">
<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Arial, sans-serif; font-size: 12pt; line-height: 115%;">ForeclosureIndia.com requests the Banks, DRT’s ,
Housing finance companies, State Finance corporations, all other Organizations
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YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-24834891641974480292013-03-27T05:56:00.000+05:302013-03-27T06:06:17.319+05:30Banks initiate crackdown on wilful defaultersTo recover dues from 50 top defaulters; finance ministry wants proceedings fast-tracked<strong style="background-color: white; color: #666666; font-family: Tahoma, Arial, Georgia; font-size: 11px;">Manojit Saha | Mumbai </strong><span style="background-color: white; color: #666666; font-family: Tahoma, Arial, Georgia; font-size: 11px;"> </span><strong style="background-color: white; color: #666666; font-family: Tahoma, Arial, Georgia; font-size: 11px;">March 26, 2013</strong><span style="background-color: white; color: #666666; font-family: Tahoma, Arial, Georgia; font-size: 11px;"> Last Updated at 00:54 IST</span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Government-owned banks have started cracking the whip on wilful defaulters, with the finance ministry asking them to recover dues from the top 50 defaulters as the first step. Banks have been asked to furnish the information of the top-50 immediately.</span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Wilful defaulters are those borrowers who have defaulted on loan repayment to banks despite having adequate cash flows and a healthy net worth. The ones who have not utilised the funds borrowed for specific purposes and diverted those for other purposes have also been categorised as wilful defaulters by the Reserve Bank of India (RBI).</span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">The finance ministry has asked chief executives of public-sector banks to take approval of their boards and begin proceedings for penal measures. The ministry has also asked banks to lodge formal complaints against the auditors of the borrowers with the Institute of Chartered Accountants of India, if they find the auditors were negligent or deficient in conducting the duty. </span><span style="background-color: white; border: 0px; clear: both; color: maroon; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px; margin: 0px; padding: 0px;"><strong>(<a href="http://www.business-standard.com/content/general_pdf/032613_02.pdf" style="border: 0px; color: #1c3c65; cursor: pointer; margin: 0px; padding: 0px; text-decoration: none;" target="_blank">UNDER STRESS</a>)</strong></span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">The ministry’s directions have come against the backdrop of a rise in “compromises” made by banks in writing off loans. According to data compiled by the ministry, the reduction in banks’ non-performing assets (NPA) due to compromises made during write-offs was 33 per cent of the total reduction as of December-end, compared with 31 per cent as of March-end. The total NPA reduction by public-sector banks as of December-end was Rs 41,672 crore.</span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">The ministry has also mandated banks not to provide any additional facility to these companies and to bar their promoters for five years from availing of institutional financing for floating new ventures.</span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">Following the ministry’s directive, banks have formed committees — comprising chairmen, executive directors and government nominees — to update their respective boards on the matter.</span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">“The finance ministry has also directed us to obtain all necessary powers to recover dues from such defaulters,” said a senior executive of a public-sector bank.</span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">The move has come within days of Finance Minister P Chidambaram’s comments on the corporate sector’s wilful defaulters. He had said after a meeting with chiefs of public-sector banks last week: “We cannot have an affluent promoter and a sick company.”</span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 12px; line-height: 18px;">The government – the owner of public-sector banks – has been pushing for recovery of non-performing loans. Banks have also been asked to have a board-approved policy on loan recovery and to conduct a review of NPA accounts — of Rs 1 crore and more by the board of directors, and top-300 by the board’s management committee.</span><br />
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<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 10px; line-height: 18px;">* Wilful defaulters are those borrowers whoh defaulted on loan payment to banks despite having adequate cash flows and healthy networth</span><br />
<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 10px; line-height: 18px;">* No additional loans facilities to defaulters</span><br />
<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 10px; line-height: 18px;">* Banks to bar promoters of defaulting companies from institutional finance for floating new ventures for a period of 5 years</span><br />
<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 10px; line-height: 18px;">* About a third of NPA reduction is due to comprise while writing off a loan</span><br />
<span style="background-color: white; font-family: Tahoma, Arial, Georgia; font-size: 10px; line-height: 18px;">* Banks to form board level committee to monitor recovery process of willful defaulter</span><br />
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<span style="background-color: white; font-size: 12px; line-height: 18px;"><span style="font-family: Tahoma, Arial, Georgia;">http://www.business-standard.com/article/finance/banks-start-crackdown-on-wilful-defaulters-113032500424_1.html</span></span></div>
YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-3915942832045940052013-03-19T12:32:00.000+05:302013-03-19T12:32:03.831+05:30Banks must take firm steps to recover NPAs: FM<div class="postedBy" style="color: #333333; font-family: Arial,Helvetica,sans-serif; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 0px; padding: 0px 0px 5px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">
<span style="font-size: xx-small;">NEW DELHI, March 18, 2013, DHNS:</span></div>
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<span style="font-size: xx-small;">Soared to Rs 1.55 lakh cr as of Dec 2012</span></div>
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<a href="http://4.bp.blogspot.com/-egmtaQu3s0M/UUgM0zC7YhI/AAAAAAAAAig/EbxU9TcYehw/s1600/319847_thump.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-egmtaQu3s0M/UUgM0zC7YhI/AAAAAAAAAig/EbxU9TcYehw/s1600/319847_thump.gif" /></a></div>
<div style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px 0px 10px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">
<span style="font-size: xx-small;"> </span><strong style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">Concerned over the rising bad loans of public sector banks, Finance Minister P Chidambaram on Monday said the lenders must take firm steps to recover non-performing assets (NPAs) without hurting industry.</strong><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><span style="color: #363636; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"> “While we understand why NPAs have risen and the restructured accounts have risen, we also wish the banks to take strong steps to recover their dues, I think the promoters have a duty to bring in additional money and the companies have a duty to pay their dues to banks. We cannot have an affluent promoter and a sick company,” Chidambaram told reporters after meeting heads of PSU banks and financial institutions.<span class="Apple-converted-space"> </span></span><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><span style="color: #363636; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">Slow economic growth and inability of companies to payback their loans have contributed to increase in non-performing assets of the banks. This has also given rise to large scale debt-restructuring by banks.<span class="Apple-converted-space"> </span></span><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><span style="color: #363636; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">Gross NPAs of PSU banks have risen from Rs 71,080 crore as on March 2011, to Rs 1.55 lakh crore as on December 2012. Chidambaram also said that as many as 215 infrastructure projects across five sectors worth Rs 7 lakh are facing delays, underscoring the slow pace of implementation of industrial projects in the country.<span class="Apple-converted-space"> </span></span><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><span style="color: #363636; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">He, however, said that certain projects in iron and steel and coal sector have started moving of late. The real problem exists in road and power projects. There are about 68 new projects in the road sector while 40 in power sector are either not moving or moving at a slow pace. “We have to get them going,” he added.<span class="Apple-converted-space"> </span></span><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><span style="color: #363636; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">Such projects usually face hurdles due to delay in clearance from multiple authorities, leading to time and cost overruns. Analysts estimate that poor infrastructure facilities in the country remove about two percentage points from gross domestic product growth. The government has set up a ministerial panel to fast-track such projects.</span><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><span style="color: #363636; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"> Chidambaram also said that the finance ministry and the Reserve Bank of India are investigating the money laundering allegations made against three private-sector banks, but no such complaint has been made against any state-run banks. On the tight cash situation of banks, the finance minister said that he was in talks with the RBI governor D Subbarao and that he expected the RBI to take steps to address the liquidity shortage in the banking system when it meets to review its monetary policy on Tuesday.</span><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><br style="color: #363636; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; margin: 0px; padding: 0px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;" /><span style="color: #363636; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"> Chidambaram's remarks have renewed hopes among investors that the RBI will also cut the cash reserve ratio of banks to help them with adequate cash in hand.</span></div>
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<span style="color: #363636; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">http://www.deccanherald.com/content/319847/banks-must-take-firm-steps.html </span></div>
YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-7809359646952129782013-02-13T13:11:00.000+05:302013-02-13T13:11:04.050+05:30Credit Unworthy<span style="background-color: white; color: #999999; font-family: georgia; font-weight: bold; line-height: 21px;"><span style="font-size: xx-small;">Ill-behaved Indian borrowers will now find it tough to hide from authorities</span></span><br />
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One morning, two years ago, when the officials of the Asset Reconstruction Company of India Ltd (ARCIL), which buys and sells bad loans acquired from banks, turned up at a Bangalore housing complex to <a href="http://businesstoday.intoday.in/story/rbi-sees-pressure-on-banks%C3%A2%E2%82%AC%E2%84%A2-profitability/1/191119.html" mce_href="http://businesstoday.intoday.in/story/rbi-sees-pressure-on-banks%C3%A2%E2%82%AC%E2%84%A2-profitability/1/191119.html" style="color: #004990; font-weight: bold; outline: none; text-decoration: initial;" target="_blank" title="RBI sees pressure on profitability of banks">repossess a defaulter's flats</a>, they were nonplussed. The defaulter's tenants - a police inspector, a politician and a small-time businessman - were all influential. One had removed all the locks on the outside of the front door. Despite the backing of an order from the chief metropolitan magistrate and a team of cops, the ARCIL officials could do little but request the tenant to open the door. Morning passed into afternoon, and finally the police decided to smash in the door. Alarmed by the noise, the tenant finally opened it. The second tenant threatened the ARCIL team with dire consequences. The third threatened to commit suicide. "We persisted with our request for the lease agreements executed by the defaulting borrower," says an ARCIL official. But the tenants cited the law to prevent the officials from entering the flats. After much discussion, the tenants sought 10 days to find other accommodation, and promised in writing to vacate.<br /><br />The story did not end there.<br /><br />"We granted them the time, as the police also advised us," the ARCIL official said. But the very next day, the tenants obtained a temporary stay on the repossession order, from the <a href="http://businesstoday.intoday.in/story/hdfc-bank-md-aditya-puri-on-economic-situation-banking-sector/1/192318.html" mce_href="http://businesstoday.intoday.in/story/hdfc-bank-md-aditya-puri-on-economic-situation-banking-sector/1/192318.html" style="color: #004990; font-weight: bold; outline: none; text-decoration: initial;" target="_blank" title="'No cause of alarm for banking sector'">debt recovery tribunal</a>. The ARCIL officials are still doing the rounds of the court to repossess the flats.<br /><br />There is no dearth of stories about defaulters using every means possible to scuttle the legal process. A jewellery exporter offered disguised copper alloy as part of the collateral for a loan, and later sued the bank for his 'missing' gold. In another case, ARCIL had to arrange a contingent of 200 policemen and private security guards to repossess a textile manufacturing company's factories.<br /><br />"We end up getting the most difficult borrowers," says P. Rudran, Managing Director and CEO, ARCIL. Bankers tend to sell whatever they cannot recover on their own, he explains.<br /><br />The concept of focused asset reconstruction companies for the recovery of <a href="http://businesstoday.intoday.in/story/bad-loans-indian-banking-system/1/189936.html" mce_href="http://businesstoday.intoday.in/story/bad-loans-indian-banking-system/1/189936.html" style="color: #004990; font-weight: bold; outline: none; text-decoration: initial;" target="_blank" title="Banks hit by surge in bad loans">non-performing assets (NPAs)</a> was born in early 2000 to help banks. The 63-year-old Rudran, who operates from a tenth-floor office in a suburban Mumbai tower, has his work cut out, judging by the mounting NPAs in the banking system.<br /></div>
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Arun Thukral, CEO of credit tracker CIBIL, at Mumbai's busy Churchgate station. He says: 'A bad credit history can mean trouble. If fresh loans won't go to bad borrowers, it naturally improves the credit culture.</div>
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<br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Gross NPAs are expected to touch 3.5 per cent, and corporate debt restructuring, 5.7 per cent, of total advances in the banking industry in 2012/13. Loans and advances in the system stood at Rs 50.74 trillion (a trillion equals 100,000 crore) in 2011/12. </span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Rudran's ARCIL so far has bought nearly Rs 50,000 crore worth of NPAs in the past decade.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">"No one borrows money to default, and not all NPAs are wilful defaults," says S. Ravi, who runs a chartered accountancy firm in South Delhi, and also sits on the board of IDBI Bank Ltd. "You have to separate the wheat from the chaff," he adds.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Ravi's argument can be justified, as even good borrowers can </span><a href="http://businesstoday.intoday.in/story/tips-to-manage-your-education-loan-burden/1/189393.html" mce_href="http://businesstoday.intoday.in/story/tips-to-manage-your-education-loan-burden/1/189393.html" style="color: #004990; font-family: arial; font-size: 15px; font-weight: bold; line-height: 21px; outline: none; text-decoration: initial;" target="_blank" title="How to manage your education loan burden">get trapped in NPAs</a><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;"> because of ups and downs in the economy, a sudden rise in interest rates, inflation and other reasons beyond their control.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">But Indian borrowers can be reckless, too. The track record suggests that a part of stressed assets turns into wilful defaulters. The value of suits filed against defaulters has more than doubled in five years to reach Rs 23,439 crore in 2011/12. </span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">The alarming trend of borrowers disposing of assets prompted the Reserve Bank of India (RBI) to expand the definition of 'wilful defaulter'. Before 2008, it simply meant someone who had the capacity to repay, or who diverted or siphoned off borrowed money. Now, the definition includes promoters who dispose of collateral assets without the knowledge of the lending bank.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><div style="border: 0px solid rgb(215, 215, 215); color: #3d4239; float: center; font-family: arial; font-size: 15px; line-height: 21px; margin: 2px 15px 2px 0px; padding: 0px; width: 650px;">
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<img align="center" alt="" border="0" hspace="0" src="http://media2.intoday.in/btmt/images/stories//February2013/loan-default_lag_021213080403.jpg" style="border: 1px solid rgb(215, 215, 215); margin: 2px;" title="" valign="top" vspace="0" /></div>
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<br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Another symptom of bad credit behaviour is the over four million cases of bounced cheques - mostly retail - pending in the courts. The volume of bounced cheques is equivalent to the volume of cheques issued every month in a city the size of Ahmedabad, Bangalore or Kolkata.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Do Indians have a cavalier attitude </span><a href="http://businesstoday.intoday.in/story/npa-of-banking-sector-up-1.28-pc-in-fy12/1/188736.html" mce_href="http://businesstoday.intoday.in/story/npa-of-banking-sector-up-1.28-pc-in-fy12/1/188736.html" style="color: #004990; font-family: arial; font-size: 15px; font-weight: bold; line-height: 21px; outline: none; text-decoration: initial;" target="_blank" title="NPA of banking sector up 1.28 pc in FY12">towards timely payment</a><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;"> ? Some in the industry believe so. For example, global credit insurer Atradius, present in India for well over a decade, has documented payment delays in the country, and found that business-to-business payment delays of more than three months stood at 8.4 per cent of domestic invoices in November 2012 - well above the Asia average of 5.5 per cent. And the value of uncollectable (written off) business-to-business receivables was 7.5 per cent in India, compared to the Asia average of 5.3 per cent.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">This would make any foreigner hesitate to do business with Indian promoters. "We have seen delays in the IT sector or amongst the small and medium enterprises," says Arun Rajan, country manager, Atradius.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">This bad payment habit extends to bank loans. Even some young borrowers, such as students, default, in their first relationship with a bank. Today, gross NPAs in education loans are over seven per cent of advances. As that number is rising, banks are going slow on education loans. Former finance minister Pranab Mukherjee had even proposed a credit guarantee fund to compensate the banks, but it never materialised for lack of budgetary allocation. RBI Deputy Governor K.C. Chakrabarty highlighted the problem of student loan defaults during a lecture at the Noida-based JRE School of Management last year. "I suggest school alumni associations should become active in inculcating ethics and values among students," he said.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Sudip Bandyopadhyay, former CEO of Reliance Money, who now runs a firm called Destimoney Securities Pvt Ltd, says students are not mature borrowers. "Also, many times, the placement is not commensurate with the money spent on a course," he says.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Bankers say students sometimes leave the country without paying up. "We don't have a good tracking system - it is still evolving," says IDBI's Ravi. Some experts suggest that banks could reach out to such defaulters through their parents or by coordinating with immigration authorities.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><div style="border: 0px solid rgb(215, 215, 215); color: #3d4239; float: center; font-family: arial; font-size: 15px; line-height: 21px; margin: 2px 15px 2px 0px; padding: 0px; width: 650px;">
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<img align="center" alt="" border="0" hspace="0" src="http://media2.intoday.in/btmt/images/stories//February2013/loan-default2_lag_021213080403.jpg" style="border: 1px solid rgb(215, 215, 215); margin: 2px;" title="" valign="top" vspace="0" /></div>
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<br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Another area where borrowers often behave erratically is credit cards. Bankers have turned extremely cautious here: RBI data shows that the number of credit cards actually fell from 23.1 million in March 2007 to 17.7 million in March 2012. Card spend has, however, increased from Rs 41,400 crore to Rs 96,600 crore. "It is better to have a few good customers than many bad ones," says Bandyopadhyay of Destimoney. Bankers say nonsalaried people with an irregular income are more likely to default.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Foreign banks and their non-banking arms, too, have had bitter experiences in consumer finance after the economic downturn in 2008. Fullerton India, a non-banking finance company (NBFC) backed by Singapore-based Temasek Holdings, started with a nearly 90 per cent unsecured lending portfolio around five years ago. It suffered huge losses in the unsecured segment, with gross NPAs rising to over 10 per cent in the overall business. Since then, it has cut its exposure to half in the unsecured segment, especially personal loans.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">The only disciplined borrowers, data suggests, are mortgaged borrowers. "We haven't seen people not paying up on a home or car loan in India," says Arun Thukral, CEO of the 12-year-old Credit Information Bureau (India) Ltd, or CIBIL. The bureau keeps records of all banks' borrowers, assigning each a credit score between 300 and 900, where 900 indicates the best repayment behaviour. The score helps a new lender assess the credit behaviour of an individual or company.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Thukral points out that Indians are not as leveraged as borrowers in the US or UK, but adds that credit tracking infrastructure is well developed in those countries, recovery mechanisms are more robust and borrowers are mature enough to admit to mistakes. "Post-2008, we all heard the stories of people leaving their cars on the road or abandoning their well furnished flats for bankers to repossess," says Bandyopadhyay. ARCIL's Rudran says he is not hopeful of such behaviour in India any time soon.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">The lack of credit tracking infrastructure in India until recently has contributed to borrowers' lax attitude towards financial obligations. "There was always another bank ready to welcome you with open arms," says a banker who does not want to be named.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">CIBIL is still struggling to rope in many institutions to get a better picture of credit behaviour. Four leading cooperative bank associations in Maharashtra joined CIBIL 10 long years after it was set up. "Politicians sell the loan waiver carrot, advising farmers not to repay banks," says an NBFC official who travels extensively in rural India. Banks are wary of lending to farmers as this segment has a history of default.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Sanjay Agarwal, group head for retail business at ARCIL, says there is a tendency in India to resort to litigation to scuttle the recovery process. For instance, he says, as soon as ARCIL buys an NPA from a bank, the borrower approaches the court, challenging the asset transfer.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">"There are cases that are unresolved for more than eight years," says ARCIL's Rudran. "Asset recovery is a very tough business. You have to find out new methods to deal with rogue borrowers." He adds that defaulters often make all sorts of excuses and try to stymie the recovery process by approaching the courts.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">"The borrower also uses indirect pressure from influential people," says a banker in the NPA department of a public sector bank who has received many calls from politicians. Deepak Gupta, Joint Managing Director, Kotak Bank - one of the few banks that specialise in buying NPAs from other banks - concurs, saying: "Most corporate default cases get resolved only through courts."</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><div style="border: 0px solid rgb(215, 215, 215); color: #3d4239; float: center; font-family: arial; font-size: 15px; line-height: 21px; margin: 2px 15px 2px 0px; padding: 0px; width: 591px;">
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<img align="center" alt="" border="1" hspace="0" src="http://media2.intoday.in/btmt/images/stories//February2013/loan-default_650b_021213080403.jpg" style="border: 1px solid rgb(215, 215, 215); margin: 2px;" title="" valign="top" vspace="0" /></div>
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P. Rudran, MD & CEO, ARCIL, at the Bombay High Court, where many default cases are heard. He says: 'Some cases are unresolved for over 8 years. Asset recovery is a tough business. You have to find new ways to deal with rogue borrowers.' (Photo: Nishikant Gamre)</div>
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<br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">The courts are flooded with such cases. Take, for example, litigation between companies and banks over forex derivatives contracts. Many midsize exporters and importers who hedged their foreign currency risk suffered losses when the rupee-dollar rate moved beyond their comfort zone. Companies that had foreign currency exposure blamed the banks for mis-selling, and banks countered by saying the companies had failed to read the fine print. In November last year, the Supreme Court settled the wrangle by ruling that 'wilful default' covers not only normal banking transactions such as borrowing and lending, but also derivatives contracts. The borrowers lost, and bankers can now go after defaulters in derivatives contracts.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Another reason for bad behaviour by borrowers is the multiplicity of lenders. Apart from banks, there are NBFCs of varying shapes and sizes, microfinance institutions, district cooperative banks and regional rural banks and unregistered sources. At a recent seminar, Anand Sinha, another RBI Deputy Governor, cited the example of Andhra Pradesh, where microfinance institutions lent indiscriminately. "This would not have reached the proportions it did if there was information-sharing amongst MFIs," says Sinha.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">CIBIL's Thukral says the bureau is gradually helping improve the credit culture, as more and more people are aware that a bad credit history can mean trouble. Banks put credit bureau reports at the top of their checklist. "If fresh loans won't go to bad borrowers, it naturally improves the culture," says Thukral.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">With the </span><a href="http://businesstoday.intoday.in/story/home-loan-review-your-credit-report-before-applying-for-home-loan/1/13434.html" mce_href="http://businesstoday.intoday.in/story/home-loan-review-your-credit-report-before-applying-for-home-loan/1/13434.html" style="color: #004990; font-family: arial; font-size: 15px; font-weight: bold; line-height: 21px; outline: none; text-decoration: initial;" target="_blank" title="'Review your credit report before applying for a loan'">role of credit reports</a><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;"> becoming more important, some see a business opportunity. Two Mumbai-based entrepreneurs have set up Credit Sudhaar, a startup that offers advisory services to improve one's credit score. "Our clients are not only those who made a mistake in the past, but also those who want to maintain a good credit score," says co-founder Arun Ramamurthy, who formerly worked with Citibank.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">CIBIL's Thukral says it is a reflection of growing awareness that hassled borrowers sometimes walk in or call CIBIL's helpline to discuss negatives in their report. "The cultural fabric of India is very different from the West," says Thukral. "Our parents and grandparents keep reminding us: jitni chadar ho utnay hi paon phelane chahiye (stretch your legs only as far as your blanket will go)."</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">Today, the CIBIL effect is not </span><a href="http://businesstoday.intoday.in/story/score-better-credit/1/9953.html" mce_href="http://businesstoday.intoday.in/story/score-better-credit/1/9953.html" style="color: #004990; font-family: arial; font-size: 15px; font-weight: bold; line-height: 21px; outline: none; text-decoration: initial;" target="_blank" title="ARCHIVE | Score better credit">restricted to borrowing</a><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;"> . A European bank in India, for example, requires job applicants in India to submit credit reports before it offers them a job. A professional who works for a private company and does not wish to be identified, said his friend was asked for a credit report when he approached Delhi Public School for admission for his daughter.</span><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><br style="color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;" /><span style="background-color: white; color: #3d4239; font-family: arial; font-size: 15px; line-height: 21px;">The possibilities for rogue borrowers to hide are shrinking. Taking the locks off a door or moving to another city won't work much longer. Time to check your credit score.</span>YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com1tag:blogger.com,1999:blog-3468941224918996983.post-8315560411501283352012-12-24T23:50:00.000+05:302012-12-24T23:52:19.140+05:30The problem with bad loans<br />
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The health of the banking sector is deteriorating. India needs robust insolvency laws</div>
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<a href="http://www.livemint.com/Search/Link/Author/Sunil%20B.S." style="color: #aa6015; text-decoration: none;">Sunil B.S.</a> <span class="display_n_media" style="border: 0px; line-height: 30px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">First Published: </span><span style="line-height: 30px;">Thu, Aug 23 2012. 07 30 PM IST</span></div>
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<b style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">pdated:</b> Thu, Aug 23 2012. 07 36 PM IST</div>
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The sharp economic downturn has once again brought the problem of bad loans to the forefront.</div>
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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.</div>
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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”.</div>
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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 <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>1.37 trillion and restructured assets <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>218 trillion.</div>
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<img alt="photo" class="left" src="http://www.livemint.com/r/LiveMint/Period1/2012/08/24/Photos/loans621.jpg" height="200" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; float: left; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" width="300" />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.</div>
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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</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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<a href="http://www.livemint.com/Opinion/FF0FFDxOooUbUDEcAWDHmI/The-problem-with-bad-loans.html">http://www.livemint.com/Opinion/FF0FFDxOooUbUDEcAWDHmI/The-problem-with-bad-loans.html</a></div>
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<a href="http://foreclosureindia.com/">http://foreclosureindia.com/</a></div>
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YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-42437714475249773812012-12-24T23:44:00.001+05:302012-12-24T23:44:50.290+05:30A reconstruction boom?<span style="background-color: white; color: #6f6a2f; font-family: Unna, 'Times New Roman', Times, serif; font-size: 18px; line-height: 22px;">For the first time, that there exists a legislative framework that allows ARCs to focus on revival and reconstruction.</span><br />
<span style="font-size: x-small;"><a href="http://www.livemint.com/Search/Link/Author/Haseeb%20A.%20Drabu" style="color: #aa6015; font-family: Unna, 'Times New Roman', Times, serif; text-decoration: none;">Haseeb A. Drabu</a><span style="background-color: white; font-family: Unna, 'Times New Roman', Times, serif;"> .</span></span><br />
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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These possibilities, including those of changing owners, promoters or managements, will enable ARCs to offer better packages to banks for bad loans.</div>
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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.</div>
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<i style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">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 to</i><a href="http://www.livemint.com/r/%3cp%3ewww.livemint.com/methodandmanner%3c/p%3e%3ctagline%3e%3cauthor%3e%3cname%3e%3cs1%3e-%3c/s1%3e%3c?EM-dummyText%20reporter?%3E%3C/name%3E%3C/author%3E%3C/tagline%3E" style="color: #aa6015; text-decoration: none;">www.livemint.com/methodandmanner-</a></div>
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<a href="http://www.livemint.com/Opinion/bsS1xllKPFzCj95WqqoSxN/A-reconstruction-boom.html">http://www.livemint.com/Opinion/bsS1xllKPFzCj95WqqoSxN/A-reconstruction-boom.html</a></div>
YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-63236415876754502832012-12-24T23:39:00.000+05:302012-12-24T23:40:26.146+05:30Asset 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.<br />
<a href="http://www.livemint.com/Search/Link/Author/Dinesh%20Unnikrishnan" style="background-color: white; color: #aa6015; font-family: Unna, 'Times New Roman', Times, serif; font-size: 16px; text-decoration: none;">Dinesh Unnikrishnan</a><span style="background-color: white; font-family: Unna, 'Times New Roman', Times, serif; font-size: 16px;"> </span><br />
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<b style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Mumbai:</b> 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.</div>
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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.</div>
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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.</div>
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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.</div>
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For companies too, conversion of debt into equity will be beneficial as their interest payment burden will come down.</div>
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“It’s indeed a big positive for ARCs,” said <span class="person" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-size: 13px; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><a href="http://www.livemint.com/Search/Link/Keyword/P.%20Rudran" style="color: #aa6015; text-decoration: none;">P. Rudran</a></span>, 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.”</div>
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Another key provision of the debt recovery Bill allows banks to accept immovable property of defaulting companies to realize claims.</div>
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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.</div>
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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.</div>
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“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 <span class="person" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-size: 13px; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><a href="http://www.livemint.com/Search/Link/Keyword/P.H.%20Ravikumar" style="color: #aa6015; text-decoration: none;">P.H. Ravikumar</a></span>, managing director and chief executive officer of <span class="company" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-size: 13px; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><a href="http://www.livemint.com/Search/Link/Keyword/Invent%20Assets%20Securitisation%20and%20Reconstruction%20Pvt.%20Ltd" style="color: #aa6015; text-decoration: none;">Invent Assets Securitisation and Reconstruction Pvt. Ltd</a></span>. “The new provisions will help ARCs to focus more on reviving the units rather than just buying out the bad assets.”</div>
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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. <span class="person" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-size: 13px; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><a href="http://www.livemint.com/Search/Link/Keyword/Birendra%20Kumar" style="color: #aa6015; text-decoration: none;">Birendra Kumar</a></span>, chief executive officer of <span class="company" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-size: 13px; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><a href="http://www.livemint.com/Search/Link/Keyword/International%20Asset%20Reconstruction%20Co.%20Pvt.%20Ltd" style="color: #aa6015; text-decoration: none;">International Asset Reconstruction Co. Pvt. Ltd</a></span>, said more clarity will come only after the Reserve Bank announces the norms.</div>
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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.</div>
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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 <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>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 <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>6,200 crore, Invent has bought assets worth <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>2,500 crore, while International has principal outstanding assets of <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>4,000-<span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>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 <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>1.6 trillion in September from <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>1.1 trillion in the year-ago period, with state-run banks leading the pack.</div>
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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 <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>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 <span class="person" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-size: 13px; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><a href="http://www.livemint.com/Search/Link/Keyword/Abhishek%20Kothari" style="color: #aa6015; text-decoration: none;">Abhishek Kothari</a></span>, research analyst at Violet Arch Securities Ltd.</div>
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“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.”</div>
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<a href="http://www.livemint.com/Politics/xtLcRxhvhTqpwySmiABmYM/Asset-reconstruction-firms-expect-boost-in-business.html">http://www.livemint.com/Politics/xtLcRxhvhTqpwySmiABmYM/Asset-reconstruction-firms-expect-boost-in-business.html</a></div>
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YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-76540834197834516132012-12-23T09:18:00.000+05:302012-12-23T09:18:36.514+05:30Foreign investment limit in ARCs raised to 74%. The finance ministry said that 74% would be the combined investment limit for FDIs and FIIs<a href="http://www.livemint.com/Search/Link/Author/Asit%20Ranjan%20Mishra" style="background-color: white; color: #aa6015; font-family: Unna, 'Times New Roman', Times, serif; font-size: 16px; text-decoration: none;">Asit Ranjan Mishra</a><span style="background-color: white; font-family: Unna, 'Times New Roman', Times, serif; font-size: 16px;"> </span><br />
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<b style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">New Delhi</b>: 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.</div>
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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 <span style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: 'Utopia Std_Rupee'; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="WebRupee" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-family: WebRupee; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Rs.</span></span>1.9 trillion of loans till September.</div>
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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.</div>
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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.</div>
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<span class="person" style="background-color: transparent; background-position: initial initial; background-repeat: initial initial; border: 0px; font-size: 13px; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><a href="http://www.livemint.com/Search/Link/Keyword/S.C.%20Bhatia" style="color: #aa6015; text-decoration: none;">S.C. Bhatia</a></span>, 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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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<a href="http://www.livemint.com/Politics/xZNSZVtOkqUHUAyHuklgwO/Foreign-investment-limit-in-ARCs-raised-to-74.html">http://www.livemint.com/Politics/xZNSZVtOkqUHUAyHuklgwO/Foreign-investment-limit-in-ARCs-raised-to-74.html</a></div>
YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-42204229483171489722012-12-18T22:57:00.000+05:302012-12-18T22:57:03.948+05:30Bank auction buyers cannot file writ petitions seeking refund: HC<span style="background-color: white; color: #7f7f7f; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; text-transform: uppercase;"><span style="font-size: x-small;">MOHAMED IMRANULLAH S.</span></span><br />
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Dismisses case seeking refund of Rs. 4.25 lakh from Canara Bank</div>
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<span style="color: #3b3a39; font-size: 14px; line-height: 18px;">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.</span></div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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<span style="color: #3b3a39;">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.</span><span style="color: red;"> It also pointed out that the sale certificate issued in favour of the purchaser was exempted from being registered under the Registration Act.</span></div>
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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.</div>
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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:</div>
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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.</div>
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<span style="color: #3b3a39; font-family: Georgia, Times New Roman, Times, serif;"><span style="font-size: 14px; line-height: 18px;">http://www.thehindu.com/news/cities/Madurai/bank-auction-buyers-cannot-file-writ-petitions-seeking-refund-hc/article4105979.ece</span></span></div>
YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-11898306603009502582012-12-15T06:53:00.003+05:302012-12-15T06:53:57.380+05:30Private Treaty under SARFEASI act <br />
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<span style="font-family: 'Bookman Old Style';"><br /></span><span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">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:-</span></div>
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<span style="font-family: 'Bookman Old Style';">"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.<o:p></o:p></span></div>
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<span style="font-family: 'Bookman Old Style';">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."<o:p></o:p></span></div>
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<span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">What if the borrower fails to give consent?</span></div>
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<span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">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:-</span></div>
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<span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">“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:</span></div>
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<span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">"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:</span></div>
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<span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or</span></div>
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<span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">b) by inviting tenders from the public;</span></div>
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<span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">c) by holding public auction; or</span></div>
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<span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">d) by private treaty."</span></div>
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<span style="font-family: 'Bookman Old Style'; line-height: 15.75pt;">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.”</span></div>
YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-5587005719109931152012-12-15T06:13:00.000+05:302012-12-15T06:13:35.087+05:30New Sarfaesi to break loan pricing deadlock<span style="font-family: arial, verdana; font-size: 11px;">Published: Friday, Dec 14, 2012, 1:58 IST </span><br style="font-family: arial, verdana; font-size: 11px; margin: 0px; padding: 0px;" /><span style="font-family: arial, verdana; font-size: 11px;">By </span><b style="font-family: arial, verdana; font-size: 11px; margin: 0px; padding: 0px;"><a href="http://www.dnaindia.com/authors/megha-mandavia" style="color: #731643; margin: 0px; padding: 0px; text-decoration: none;">Megha Mandavia</a> & <a href="http://www.dnaindia.com/authors/aswathy-varughese" style="color: #731643; margin: 0px; padding: 0px; text-decoration: none;">Aswathy Varughese</a></b><span style="font-family: arial, verdana; font-size: 11px;"> | Place: Mumbai | Agency: DNA</span><br />
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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.</div>
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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.</div>
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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. <br style="margin: 0px; padding: 0px;" />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.”<br style="margin: 0px; padding: 0px;" />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. <br style="margin: 0px; padding: 0px;" />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.”<br style="margin: 0px; padding: 0px;" />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. <br style="margin: 0px; padding: 0px;" />“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. <br style="margin: 0px; padding: 0px;" />megha.mandavia@dnaindia.net , aswathy.rachel@dnaindia.net</div>
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<a href="http://www.dnaindia.com/money/report_new-sarfaesi-to-break-loan-pricing-deadlock_1777355">http://www.dnaindia.com/money/report_new-sarfaesi-to-break-loan-pricing-deadlock_1777355</a></div>
YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-42443454896212654822012-12-15T06:07:00.000+05:302012-12-15T06:09:28.470+05:30NPA recovery Bill won’t shake things up<span style="font-family: arial, verdana; font-size: 11px;">Published: Friday, Dec 14, 2012, 2:08 IST </span><br />
<span style="font-family: arial, verdana; font-size: 11px;">By </span><b style="font-family: arial, verdana; font-size: 11px; margin: 0px; padding: 0px;"><a href="http://www.dnaindia.com/authors/megha-mandavia" style="color: #731643; margin: 0px; padding: 0px; text-decoration: none;">Megha Mandavia</a></b><span style="font-family: arial, verdana; font-size: 11px;"> | Place: Mumbai | Agency: DNA</span><br />
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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.</div>
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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.</div>
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“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.</div>
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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.</div>
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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.”</div>
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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.</div>
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“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.</div>
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<a href="http://www.dnaindia.com/money/report_npa-recovery-bill-wont-shake-things-up_1777362">http://www.dnaindia.com/money/report_npa-recovery-bill-wont-shake-things-up_1777362</a></div>
YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-8206405473237272462012-09-14T12:11:00.001+05:302012-09-14T12:11:56.950+05:30Our New Blog<div dir="ltr" style="text-align: left;" trbidi="on">
Hello Everyone,<br />
<br />
Some time ago we have launched our new blog -<br />
<div style="text-align: center;">
<b><a href="http://blog.foreclosureindia.com/">blog.foreclosureindia.com</a></b></div>
<br />
We hope to see you all there and as always we will strive to keep you up to date with our latest news and information about all thing related to foreclosures.<br />
<br />
Regards,<br />
Bhargav.Y<br />
Team ForeclosureIndia</div>
Bhargavhttp://www.blogger.com/profile/09646950908119968914noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-92070116865064331022012-08-13T08:25:00.001+05:302012-08-13T09:13:45.157+05:30Asset quality of banks a serious cause for concern<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="background-color: white; color: #999999; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 16px; font-style: italic;">For public sector banks, the situation appears to have taken a particularly dire turn since the quarter ended June 2011. </span><i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; outline: none;">The author is Director, Crisil Research, a division of Crisil.</i><br />
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<a href="http://4.bp.blogspot.com/-1vdyuNUo2KU/UCh31OT3bSI/AAAAAAAAAfU/DlBAhkj6OQU/s1600/Picture+147+picture.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="235" src="http://4.bp.blogspot.com/-1vdyuNUo2KU/UCh31OT3bSI/AAAAAAAAAfU/DlBAhkj6OQU/s400/Picture+147+picture.jpg" width="400" /></a></div>
<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; outline: none;"><br /><i style="background-color: white; outline: none; text-align: justify;">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.</i></i><br />
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<div style="text-align: justify;">
<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
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<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
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<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
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<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
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<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
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<div style="text-align: justify;">
<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">This qualitative change is also indicated by a fairly sharp increase in the number of corporate debt restructuring (CDR) cases.</i></div>
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<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
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<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
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<div style="text-align: justify;">
<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
</div>
<div class="body" style="font-style: normal; margin-bottom: 20px; outline: none;">
<div style="text-align: justify;">
<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
</div>
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<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
</div>
<div class="body" style="font-style: normal; margin-bottom: 20px; outline: none;">
<div style="text-align: justify;">
<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">Gross NPAs of the banking system as a percentage of advances are, therefore, likely to touch 3.5 per cent by March 2013.</i></div>
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<div style="text-align: justify;">
<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
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<div class="body" style="font-style: normal; margin-bottom: 20px; outline: none;">
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<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; line-height: 18px; outline: none;">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.</i></div>
</div>
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<i style="background-color: white; color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; outline: none;"><a href="http://www.thehindu.com/business/Economy/article3758412.ece">http://www.thehindu.com/business/Economy/article3758412.ece</a>
</i></div>
</div>
YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-31019013976299704522012-07-31T12:08:00.000+05:302012-08-06T17:10:40.369+05:30Q1 - Banks are showing profit but Bad loans are hurting the performance ...<div dir="ltr" style="text-align: left;" trbidi="on">
The first quarter of F.I 12-13 has ended on June 30,2012.<br />
<br />
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. <br />
<br />
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%.<br />
<br />
<b>Update.</b><br />
<b><br /></b><br />
<br />
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.<br />
<br />
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%<br />
<br />
</div>Bhargavhttp://www.blogger.com/profile/09646950908119968914noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-24386351597753697342012-07-08T16:42:00.001+05:302012-07-08T17:19:46.515+05:30How to buy property in an auction<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: center;">
<a href="http://2.bp.blogspot.com/-TX7tpxHAZ0I/T_lrk3uc6HI/AAAAAAAAAfE/2tazqp6LNLE/s1600/Property_Auction_i_1136725f.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="202" src="http://2.bp.blogspot.com/-TX7tpxHAZ0I/T_lrk3uc6HI/AAAAAAAAAfE/2tazqp6LNLE/s320/Property_Auction_i_1136725f.jpg" width="320" /></a></div>
<br />
<span class="author">Anand Kalyanaraman</span><br />
<div class="articleLead" style="text-align: justify;">
Tight timelines in the auction process necessitate deep pockets.</div>
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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. </div>
<div class="body" style="text-align: justify;">
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.
</div>
<h3 style="text-align: justify;">
Deep pockets needed
</h3>
<div class="body" style="text-align: justify;">
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. </div>
<div class="body" style="text-align: justify;">
The notice includes the details of the property, date, time and venue of the auction, reserve price, and earnest money deposit. </div>
<div class="body" style="text-align: justify;">
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. </div>
<div class="body" style="text-align: justify;">
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. </div>
<div class="body" style="text-align: justify;">
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. </div>
<div class="body" style="text-align: justify;">
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. </div>
<h3 style="text-align: justify;">
Online or offline?
</h3>
<div class="body" style="text-align: justify;">
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 <b style="background-color: lime; color: red;"><i><span style="font-family: Verdana,sans-serif; font-size: small;"><a href="http://www.foreclosureindia.com/">www.foreclosureindia.com</a></span> </i></b>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. </div>
<div class="body" style="text-align: justify;">
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.
</div>
<h3 style="text-align: justify;">
What to watch out for
</h3>
<div class="body" style="text-align: justify;">
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. </div>
<div class="body" style="text-align: justify;">
This apart, keep in mind that banks auction property on an ‘as-is-where is’, ‘as-is what-is’ basis. </div>
<div class="body" style="text-align: justify;">
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. </div>
<div class="body" style="text-align: justify;">
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. </div>
<div class="body">
<i><a href="mailto:anandk@thehindu.co.in">anandk@thehindu.co.in</a></i></div>
<div class="body">
<i>http://www.thehindubusinessline.com/features/investment-world/article3613659.ece?homepage=true&ref=wl_home </i>
</div>
<span class="author"> </span>
</div>YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com1tag:blogger.com,1999:blog-3468941224918996983.post-43509142123256920572012-06-27T12:45:00.000+05:302012-06-27T12:45:20.419+05:30Help to speed up NPA recovery, Pranab tells DRT chiefs<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-size: x-small;">SPECIAL CORRESPONDENT, THE HINDU</span><br />
<br />
<div class="articleLead" style="border: 0px; font-family: Georgia, 'Times New Roman', Times, serif; margin: 0px; outline: none; padding: 0px; position: relative;">
<div style="font-style: italic; margin-bottom: 20px; outline: none; padding-bottom: 1em;">
<span style="color: red; font-size: large;">Problem of increasing NPAs has to be addressed on a priority basis.</span></div>
<div style="font-style: italic; margin-bottom: 20px; outline: none; padding-bottom: 1em;">
<a href="http://1.bp.blogspot.com/-bB02CUw73qk/T-qxStNKv5I/AAAAAAAAAe4/m-fezYbg5Yw/s1600/TH07_BU_PRANAB_MUK_1105719f.jpg" imageanchor="1" style="background-color: white; margin-left: 1em; margin-right: 1em; text-align: center;"><img border="0" height="163" src="http://1.bp.blogspot.com/-bB02CUw73qk/T-qxStNKv5I/AAAAAAAAAe4/m-fezYbg5Yw/s400/TH07_BU_PRANAB_MUK_1105719f.jpg" width="400" /></a></div>
<div style="font-style: italic; margin-bottom: 20px; outline: none; padding-bottom: 1em;">
<span style="background-color: white; color: #3b3a39; font-size: 14px; line-height: 18px;">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). </span></div>
<div style="margin-bottom: 20px; outline: none; padding-bottom: 1em;">
<span style="background-color: white; color: #3b3a39; font-size: 14px; line-height: 18px;">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.</span></div>
</div>
<div class="body" style="color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; margin-bottom: 20px; outline: none;">
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.</div>
<div class="body" style="color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; margin-bottom: 20px; outline: none;">
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.</div>
<div class="body" style="color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; margin-bottom: 20px; outline: none;">
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.”</div>
<div class="body" style="color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; margin-bottom: 20px; outline: none;">
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.</div>
<div class="body" style="color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; margin-bottom: 20px; outline: none;">
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.</div>
<div class="body" style="color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; margin-bottom: 20px; outline: none;">
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.</div>
<div class="body" style="color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; margin-bottom: 20px; outline: none;">
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.</div>
<div class="body" style="color: #3b3a39; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 14px; line-height: 18px; margin-bottom: 20px; outline: none;">
<a href="http://www.thehindu.com/business/article3498324.ece?homepage=true">http://www.thehindu.com/business/article3498324.ece?homepage=true</a>
</div>
</div>YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-26639505599476784592012-06-18T10:28:00.003+05:302012-06-18T10:28:16.119+05:30Take over of Management of An Engineering Institute.<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-size: x-small;">Yerneni Bhargav, Managing Partner, Foreclosureindia.com</span><br />
<span style="font-size: x-small;"><br /></span><br />
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.<br />
<span style="font-size: x-small;"><br /></span><br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://4.bp.blogspot.com/-i8ZAfJw7uBo/T94LaM07YKI/AAAAAAAAAeo/G5DgVwfMmRE/s1600/United+Bank+of+India-16-6-2012.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="347" src="http://4.bp.blogspot.com/-i8ZAfJw7uBo/T94LaM07YKI/AAAAAAAAAeo/G5DgVwfMmRE/s400/United+Bank+of+India-16-6-2012.jpg" width="400" /></a></div>
<br />
All the Borrowers of the Banks and Financial Institutions shall be vigilant about their loans to safe guard their management control of their businesses.<br />
<span style="font-size: x-small;"><br /></span></div>Bhargavhttp://www.blogger.com/profile/09646950908119968914noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-61666079302869898732012-06-13T15:28:00.000+05:302012-06-13T15:34:10.582+05:30Be vigilant on NPAs, Pranab tells PSBs<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="articleLead">
<img alt="Union Finance Minister Pranab Mukherjee (left) with MoS Finance Namo Narain Meena at a meeting with chief executive officers of PSBs and financial institutions in New Delhi on Tuesday. Photo: S. Subramanium" height="320" src="http://www.thehindu.com/multimedia/dynamic/01111/TH13_BU_PRANAB_1111568e.jpg" width="284" />
<br />
Banks asked to promote electronic mode of transactions </div>
<div class="body">
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. </div>
<div class="body">
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.”</div>
<div class="body">
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.</div>
<div class="body">
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.</div>
<div class="body">
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. </div>
<div class="body">
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.</div>
<div class="body">
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.</div>
<div class="body">
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. </div>
</div>YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-19899954464872929072012-06-13T15:26:00.000+05:302012-06-13T15:28:00.576+05:30How to buy or sell a house against which loan is outstanding<div dir="ltr" style="text-align: left;" trbidi="on">
<span class="pubdate" style="background-color: white; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #999999; font-family: Arial; font-size: 10px; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto;">Amit Shanbaug, ET Bureau</span><span class="separator" style="background-color: white; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #999999; font-family: Arial; font-size: 10px; line-height: 20px; margin-bottom: 10px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 5px; padding-top: 0px; text-align: -webkit-auto;"> </span><span style="background-color: white; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #999999; font-family: Arial; font-size: 10px; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto;">Jun 11, 2012, 09.19AM IST</span>
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<span style="background-color: white; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #999999; font-family: Arial; font-size: 10px; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto;"></span><br />
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #404040; font-size: 13px; line-height: 18px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
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.</div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #404040; font-size: 13px; line-height: 18px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
</div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">If a buyer pays with own funds</span></div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
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.</div>
<br />
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #404040; font-size: 13px; line-height: 18px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
</div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
However, with the steep increase in <a href="http://economictimes.indiatimes.com/topic/home%20loan" style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #336797; margin-bottom: 10px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">home loan</a> 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.</div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
Financial insecurity is just one of the reasons a <a href="http://economictimes.indiatimes.com/topic/property" style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #336797; margin-bottom: 10px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">property</a> 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.</div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
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.</div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
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.</div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
"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.</div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
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.</div>
<div style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<img alt="/photo.cms?msid=13969212" border="0" src="http://www.economictimes.indiatimes.com/photo.cms?msid=13969212" style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; display: block !important; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Nanda bought a 2-BHK house in Thane, in 2009, for Rs 35 lakh. The seller had an outstanding loan of Rs 5 lakh.</div>
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<span style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">How he settled the loan</span></div>
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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.</div>
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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.</div>
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<span style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: italic; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">"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."</span></div>
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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?</div>
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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.</div>
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<img alt="/photo.cms?msid=13969049" border="0" src="http://www.economictimes.indiatimes.com/photo.cms?msid=13969049" style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /> 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.</div>
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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. <span style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: italic; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">"I have a copy of all the original property documents. The potential buyer can get it verified with the bank as well."</span></div>
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To avoid confusion while finalising a deal, here's how you can sell (or buy) a house against which a loan is outstanding.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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"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.</div>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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"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.</div>
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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.</div>
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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.</div>
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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.</div>
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"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.</div>
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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.</div>
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<span style="font-weight: bold;">Tax implications</span>
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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.</div>
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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.</div>
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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.</div>
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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.</div>
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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).</div>
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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.</div>
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<span style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Is this the right time to sell?</span></div>
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<a href="http://www.economictimes.indiatimes.com/photo.cms?msid=13969379" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img alt="/photo.cms?msid=13969379" border="0" src="http://www.economictimes.indiatimes.com/photo.cms?msid=13969379" style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; display: block !important; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /></a>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.</div>
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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.</div>
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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.</div>
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However, keep in mind that the rate of appreciation in property prices over the next couple of years will be much slower.</div>
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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.</div>
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<a href="http://articles.economictimes.indiatimes.com/2012-06-11/news/32175069_1_resale-property-loan-interest-home-loan/3">http://articles.economictimes.indiatimes.com/2012-06-11/news/32175069_1_resale-property-loan-interest-home-loan/3</a>
</div>YPRaohttp://www.blogger.com/profile/18284182622025508254noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-29971546524513177712012-06-11T13:19:00.000+05:302012-06-11T13:19:06.172+05:30SBI's One Time Settlement of NPA's of MSME<div dir="ltr" style="text-align: left;" trbidi="on">
SBI has launched an one time scheme named <b>SBI OTS MSME, 2012</b>, this scheme has been made applicable to all the MSME's with doubtful or loss assets.<br />
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Further details including the coverage, cases which are not eligible, Settlement Formula for one time amount, payment terms can be found on sbi.co.in >>> SME >>> SBI OTS MSME, 2012.<br />
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SBI is also giving incentives @ 15% & 10% for those making full payments within one and three months.<br />
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The last date for receiving applications has been given as 31/7/2012. </div>Bhargavhttp://www.blogger.com/profile/09646950908119968914noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-5515206863267842762012-06-06T16:48:00.000+05:302012-06-06T16:48:20.312+05:30RBI says no Foreclosure charges for home loans on floating interest rate<div dir="ltr" style="text-align: left;" trbidi="on">
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On the 5th of June 2012 RBI has passed a circular informing all banks that they will no longer be allowed to charge foreclosure charges on home loans on floating interest rate basis.<br />
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RBI has also noted that<br />
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The removal of foreclosure charges/prepayment penalty on home loans will lead to reduction in the discrimination between existing and new borrowers and competition among banks will result in finer pricing of the floating rate home loans.</blockquote>
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Prior to this the banks were free to set their own foreclosure fees and only a few banks chose not to levy any and in some banks the foreclosure fees was linked to source of their income for example HDFC, LIC Housing Finance did not charge any fees if the loan was prepaid out of the own sources of the borrower.<br />
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This was causing causing a considerable amount of confusion and grief to the loan borrowers as many of them became aware of the Foreclosure fees only when they tried to switch over to a cheaper loan plan or tried to close their loans.<br />
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<a href="http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=7259">View Circular in RBI.org.in </a><br />
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<iframe height="480" src="https://docs.google.com/viewer?authuser=0&srcid=0B7SefxQl-EdpYk5wa0NNRXBnSm8&pid=explorer&a=v&chrome=false&embedded=true" width="640"></iframe></div>Bhargavhttp://www.blogger.com/profile/09646950908119968914noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-42327235739642846092012-06-06T16:47:00.001+05:302012-06-06T16:47:50.783+05:30Hotel Chidambara back under hammer<div dir="ltr" style="text-align: left;" trbidi="on">
<a href="http://timesofindia.indiatimes.com/city/nagpur/Hotel-Chidambara-back-under-hammer/articleshow/13858099.cms">Jun 6, 2012 - Times of India</a><div>
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NAGPUR: The Hotel Chidambara Internationalat Ramdaspeth (earlier Royal Palace), is once gain under the hammer. This was one of first properties of a bank defaulter that was auctioned in 2002 by evoking the stringent Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act that came into effect the same year. <br /><br />As bad loans in banking sector had become a burning issue those days. Government enacted this law which empowered banks to go-ahead with seizure and sale of defaulters' assets. Those days every auction by a bank evoking this law including that of this hotel created a hype sending signals to wilful defaulters. <br /><br />A decade later, Raipur-based businessman Balkrishna Agrawal who had purchased this hotel and rechristened it Chidambara International, is now a bank defaulter himself. He was known to be close to former chief minister of Chhattisgarh Ajit Jogi. They eventually fell apart with Agrawal joining Bahujan Samaj Party (BSP). Sources hint at political vendetta as a cause of his downfall. <br /><br />In 2002, the original owner Rajkumar Khattar had mortgaged the hotel to Shikshak Sahakari Bank, which used the SARFAESI Act to recover its dues. The bank realized Rs 4.32 crore by selling the hotel that it claimed to be one its major achievements. Now when auctions under this law have become routine, Punjab National Bank (PNB), to which Agrawal owes over Rs 20 crore has invited bids for the property. <br /><br />The bank has fixed a reserve price of Rs 12 crore—a three fold increase in a decade. This is not the first time PNB is trying to sell the property. The earlier three attempts to invite bids failed as no buyer turned up. Under the current auction, bids will be opened on June 27. <br /><br />The hotel is located on a 8,000 square feet plot and has a built up area of 30,000 square feet. Realty players have mixed opinion about its value. Deepak Heda, a real estate advisor, said the locality has a market rate of Rs 15,000 a square foot and with the structure the hotel could easily fetch up to Rs 25 crore. Pankaj Roshan, a broker, said a reserve price of Rs 16 crore could have been set considering the market rates. However, the property may not be finding takers due to several hidden liabilities. <br /><br />Agrawal was granted a loan by Kingsway branch of PNB for taking over a fertilizer factory at Raipur. However, the Chhattisgarh government cancelled the lease of the land where it was located. The business had to be shut down, leading to the default by 2007. The hotel is a part of the extended collateral security offered to the bank. <br /><br />Agrawal, who is reportedly not responding to the bank's calls, could not be contacted. His brother Santosh Agrawal said they had purchased M/s Dharamdasji Morarji Chemicals and Fertilisers, a concern that ran on a land leased by Chhattisgarh government. "Although 50 years of the tenure remained, the lease was abruptly cancelled and the business came to a standstill," he said. The firm also has around 15 acres of freehold land near Raipur which could also be disposed of by the bank. However, most of it has been encroached upon and the government has failed to react despite FIRs, he claimed.</div>Bhargavhttp://www.blogger.com/profile/09646950908119968914noreply@blogger.com0tag:blogger.com,1999:blog-3468941224918996983.post-48933730628179450772012-05-30T15:33:00.000+05:302012-05-30T15:53:21.342+05:30RBI permits banks to set their own foreclosure terms for Term Deposits<div dir="ltr" style="text-align: left;" trbidi="on">
The Reserve Bank of India has has decided to permit banks to set their own policies regarding foreclosures of Term Deposits, Daily Deposits and Recurring Deposits for the purpose of better Asset Liability Management (ALM).<br />
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Originally the banks were bond by the condition that when a Term Deposit is foreclosed for the purpose of a new term deposit in the same branch no fine/penalty can be levied as long as the new term deposit is for a longer period than the balance time of the original one.<br />
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This change now lets the banks formulate their own interest rate policies on foreclosure of term deposits.
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<b><span style="font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 12px; text-align: -webkit-auto;">RBI Circulars Issued on </span><span style="background-color: #f2f8fd; font-family: Tahoma, Arial, Verdana, 'Times New Roman'; font-size: 13px; text-align: -webkit-center;">28.5.2012:</span></b><br />
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