Foreclosureindia.Com Started E Auction Services For all Banks In India Thru BankAuctions.IN Portal

According to Ministry of Finance, Government of India directives,  All NPA’s shall be sold through E Auction only.  Free foreclosure listing service provider, Foreclosureindia.com  has started secured portal BankAuctions.IN for providing E auction services to all Banks, DRT’s to sell NPA’s online. 

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.

No of total visits to the site             - 1,343,374

No of unique visitors                       - 652,724

Total number of page views          -10,458,830

Returning visitors                            - 52.05 %

Visitors came from                           - 45554 cities & from 212 countries.

        Average viewer ship of each auction property listed is 485.  Foreclosureindia.com has set a target of 100 % growth during the present financial year. 

The advantages of  “e – publicity”  through it are explained as detailed below.

1. Free access to all visitors, unlike some portals is charging Rs 1050 to 2500 per month to show the auction property details.
2. E mail alerts are being sent to 49000 plus registered users on daily basis.
3. It is displaying the Auction properties details in two other real estate websites also, along with displaying in their portal.

           According to Ministry of Finance, Government ofIndia directives All auctions of immovable properties, under 'The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002,  shall be carried out through E Auction only to ensure a free, fair and transparent process.

            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 online portal for E-Auctions as  https://www.BankAuctions.IN. 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.  https://www.BankAuctions.IN has easy interface to enable all the investors / bidders with little knowledge of Computer and internet to participate in these property auctions. It maintains complete confidentiality & privacy for the bidders and Banks.

        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. Foreclosureindia.com 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.

        The State Bank of Hyderabad, ChaitanyaGodavari Grameena Bank, Guntur and Andhra Pradesh Grameena Vikas Bank, Warangal has empaneled BankAuctions.IN 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.

The advantages of conducting E auctions through BankAuction.IN are explained as detailed below.

1. 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.
2. Price for conducting E  auction is lowest when compared to all other service providers.
3. 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.

ForeclosureIndia.com requests the Banks, DRT’s , Housing finance companies, State Finance corporations, all other Organizations disposing of non performing assets under SARFAESI Act & DRT acts to utilize their e publicity and also their E auction facilities.

Banks initiate crackdown on wilful defaultersTo recover dues from 50 top defaulters; finance ministry wants proceedings fast-tracked

Manojit Saha  |  Mumbai  March 26, 2013 Last Updated at 00:54 IST



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.

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).

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. (UNDER STRESS)



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.

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.

Following the ministry’s directive, banks have formed committees — comprising chairmen, executive directors and government nominees — to update their respective boards on the matter.

“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.

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.”

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.

* Wilful defaulters are those borrowers whoh defaulted on loan payment to banks despite having adequate cash flows and healthy networth
* No additional loans facilities to defaulters
* Banks to bar promoters of defaulting companies from institutional finance for floating new ventures for a period of 5 years
* About a third of NPA reduction is due to comprise while writing off a loan
* Banks to form board level committee to monitor recovery process of willful defaulter

http://www.business-standard.com/article/finance/banks-start-crackdown-on-wilful-defaulters-113032500424_1.html

Bank auction buyers cannot file writ petitions seeking refund: HC

MOHAMED IMRANULLAH S.

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

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

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

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

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

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

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

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

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

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

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

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

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

Advantages of buying properties through Bank Auction/ ForeclosureIndia.com & How do I participate in a Bank Auction

Why would you want to buy a foreclosed home? Here are just a few of the reasons that homeowners and investors are flocking to the foreclosure market.

1.PRICE ADVANTAGE: Approximately 25 % cheaper than market price.

2.LEGALLY SAFE: Since Banks / Financial Institutions have given loan after verification of all the legal aspects only, these are 95 % legally safe.

3.CREDIBILITY OF SELLER: You are buying from a Bank / Financial institution, which is authorized by Govt of India to sell such properties.

4.TIME FRAME: Entire transaction will be over in less than two months period. Ownership in one month.

5.TRANSPARENCY: 100 % transparent transaction. 

6.PROBABILITY: 90% chances of winning in the Bank Auction. 

Save the rod ... and create a Frankenstein

Like all morals and most hazards, moral hazard is man-made. Only man can reduce it.
Dipankar Choudhury - LiveMint

A close friend, who works for an asset reconstruction company, recently told me after a few drinks: “I suggest that you do a project report and take a Rs.100-200 crore loan. The bank, RBI, government –will all treat you like a king if you default. Don’t borrow just 5 or 10 crore, then you will be in trouble.”

He went on: “If my son wants me to find a match for him, I will look for the daughter of a defaulter. Then his life will be made”. Yes, some entrepreneurs regularly dream of graduating from facing a problem to becoming a problem for the system.

Nearly 20 years ago, Michael Fay, an American student in Singapore, was sentenced to six cane lashes for vandalism, which due to hectic American lobbying was reduced to four and he was let off with that. His partners in crime got more severe punishment. Four years later, Fay was held in the US for possessing drugs.

Wikipedia defines moral hazard as a tendency to take undue risks because the costs are not borne by the party taking the risk. The bothersome part is that it is rife even in developed and developing countries which hold the rule of law in high esteem. Just the perspective differs: in the West, public discourse sees moral hazard largely as excessive risk-taking by overpaid bankers, in India it is repeated defaults encouraged by mollycoddling lenders.

Where genuine accommodation ends and mollycoddling begins is extremely tough to ascertain ex-ante. There have been cases of remarkable borrower resuscitation after one lifeline, and even two. And then there are the perpetual delusions. Most banks do not have this data, or choose not to compile it.

But one thumb rule will always work. Indulgence by a lender makes sense only if the underlying fundamentals of the borrower’s business are sound and he happens to be facing a cyclical problem (this of course is a judgment call but not too difficult to make, e.g. it takes some imagination to contend that airlines are facing a temporary problem and their fundamentals are sound). Else it is mala fide and a potential source of moral hazard.

It is a difficult and unpleasant subject as a result of which not much literature is available. However, in a noteworthy paper titled “Financial Intermediation in India: A Case of Aggravated Moral Hazard?” dated July 2002, Saugata Bhattacharya and Urjit Patel made an attempt to look at this issue very early in the lending growth cycle in India. Many points presented there are still relevant.

The authors identify three reasons for the malaise: large and increasing government role in the financial sector, high regulatory forbearance and absence of efficient bankruptcy procedures. They premise that the resultant moral hazard inhibits effective co-financing and capital formation in the economy.

On the first point, it is important to note that the authors identify government participation in the financial sector and not just government ownership that leads to increasing moral hazard. It includes provision of government guarantees to projects, priority sector lending, mandating write-offs of loans, and so on. In good times, there is little incentive for the government to change the status quo, and in bad times, it feels the need to increase its involvement, at which point prudence takes a back seat.

Regulatory forbearance ensures lenders, especially banks, do not close down. At least for banks there is this argument, though shallow, that faith in them should not erode. Why wholesale lenders like IFCI have to remain in perpetual life support is less understandable. If a lender will most likely never be allowed to fail, depositors will not care to monitor lender performance, managers will be less vigilant and the borrower incentivized to take advantage of the system.

Developments on the bankruptcy procedures front have however been encouraging. The SARFAESI Act (which is India’s foreclosure law) has been quite effective but there is still a long way to go.

Ironically, bankers suggest that it has been used largely as a stick to beat the borrowers with and bring them to the negotiating table, and not for seizing and selling off security, the ostensible purpose for which the law was enacted. Thus the effectiveness is at best sub-optimal. Judicial and quasi-judicial proceedings for debt recovery are still tortuous.

To conclude, I particularly like one sentence which the authors use: “This process of increasingly aggravated moral hazard driving…riskiness of the asset portfolios…is analogous to riding a bicycle without brakes – once on it, if you stop pedaling, you will fall off.” Very similar to what Ramalinga Raju remarked along with his confession of having cooked the books of Satyam for years. Let’s not carry on the comparison further; it looks scary.

Asset Reconstruction Companies - Missing the Good In Bad Loans

Business for ARCs picks up when bad loans mount with banks.  Not in India, where they remain hobbled by fear among banks and policy paralysis,
report Rishi Shah & Dheeraj Tiwari 

 

    The business of asset reconstruction companies, which specialise in settling bad loans of the financial sector, should pick up when an economy feels pain. Yet, even as the Indian economy decelerates to its slowest in three years and bad loans of banks hit an all-time high, ARCs remain in a state of drift, subdued by fear among banks and a loose policy framework. The pace of new bad loans with banks has always exceeded the loans transferred by them to ARCs for disposal. For example, between March 2009 and March 2010, even as bad loans with banks increased by Rs 15,774 crore, transfers to ARCs trailed at Rs 10,675 crore, according to data from the Reserve Bank of India (RBI). This differential is likely to increase as, between March 2010 and September 2011, bad loans of banks are up 40%. While exact numbers are not available, anecdotal evidence suggests flows to ARCs is not keeping pace. “There is no business coming our way,” says a senior official with a leading reconstruction company. According to the latest financial report of State Bank of India (SBI), India’s largest bank, it has Rs 40,000 crore of bad loans. Yet, in 2009-10 and 2010-11, it passed on just six bad loans with a combined book value of Rs 40 crore to ARCs. “In a continually rising NPA scenario, even large banks such as SBI and IDBI Bank sell three and two NPAs, respectively, in a year, that too year after year,” adds Rajiv Ranjan, president & CEO of Reliance ARC. “What can you guess about business coming the way of ARCs?” Business is not picking up for two reasons: fear among bank officials and a weak policy framework. 

FEAR OF ACTION

Bank officials are hesitant to sell bad loans. “Banking is dominated by the public sector, which is reluctant to pawn off assets to other management firms as they fear a loss of face,” says the head of a PSU bank, not wanting to be identified. When a loan is transferred, it goes off the bank’s books. But rather than see it as a way to clean the balance sheet, along with a possibility of recovering something from it, many bank officials fear this might be perceived as an admittance of failure to recover the loan. They also fear vigilance inquiries. “The problem in India is that everybody wants to complain,” says MS Verma, chairman of International Asset Reconstruction Company (IARC), an ARC promoted by HDFC Bank and Tata Capital. “Bankers are afraid that even in a fair process, questions might be asked as to why the NPAs had to be sold when recovery was possible.” Typically, every bank has a chief vigilance officer (CVO) looking into such complaints. Beyond the bank’s CVO, if required, even the Chief Vigilance Commissioner (CVC) and the Central Bureau of Investigation (CBI) can take up such inquiries. In fact, when an ED is to be promoted to CMD, CVC clearance is needed, and inquiries over transfers of bad loan to ARCs can lead to delays in appointments. Given all this, not doing anything is seen as a safer option. “In the public sector, usually, there is accountability only for doing, but none for not doing,” says a senior advocate who declined to be named as he represents banks in courts. “For existing bad loans, all he has to do is create a record that he tried to recover it in every possible way.” The numbers of Arcil, India’s largest ARC, bear that out. Arcil has acquired bad loans with a principal value of Rs 24,000 crore. Of this, Rs 9,000 crore came from ICICI Bank, a private bank, which is 50% more than what SBI gave. Both banks, along with PNB and IDBI Bank, are copromoters of Arcil.

WEAK POLICY FRAMEWORK

According to the RBI, as of June 2011, India had 13 operational ARCs, holding assets with a combined book value of about Rs 74,000 crore. But they are not endowed with capital. In developed markets, well-capitalised ARCs buy loans outright. In India, however, ARCs, pay a bank about 5% of the price of the loan agreed on. For the rest, ARCs issue security receipts (SRs), which is a promise to pay the bank a certain share of the sale value at the time of selling the bad loan. When bad loans have been transferred, both banks and ARCs have bickered over the pricediscovery mechanism and the auction process. Indian banks, typically, offer those loans to ARCs they have been unable to realise for five years or more, and so are often mired in legalities. Banks sell bad loans through an auction, for which they fix a base price. Neeta Mukerji of Arcil says the base price fixed by banks is random and has no relation to the asset’s residual value. “An ARC’s estimate of recovery expected, time frame, cost and funding cost is quite different from that of banks,” says Mukerji, officiating CEO of Arcil. Officials of four ARCs that ET spoke to say the process favours banks, with one even labelling the auction “a sham”. “They only want to sell the worthless, age-old NPAs, where they have almost exhausted recovery possibilities," says an official of one of those ARCs, not wanting to be named. "And they want us to pay a substantial price.” Verma of IARC says some banks conduct auctions only to find the “right price” for themselves to further use as a bargaining tool with defaulters. “Then, they go to the borrower and scare him by saying that ARCs will use tougher means and try to settle it for a higher price,” he adds. Another head of a smaller ARC, speaking on the condition of anonymity, says that during due diligence, one bank refuses to show any papers or even the asset to ARC officials, even though some might have legal claims on them. A government panel, with representation from industry, is currently looking at regulatory, legal and accounting issues plaguing ARCs in India. These include a standard format for documentation, ARCs going public to raise more capital and reduction in bottlenecks in the functioning of debt recovery tribunals (DRTs), which is the stage preceding ARCs. A quick resolution will benefit all stakeholders, says a finance ministry official who is part of the panel but did not want to be identified. “Experience suggests that NPAs, like a cube of ice, lose value over time. And rather fast,” he says.


http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETM%2F2012%2F03%2F13&ViewMode=GIF&PageLabel=15&EntityId=Ar01501&AppName=1 

   

Banking on staff for recovery

Lenders are dedicating full-fledged teams to curtail the threat of rising defaults. Parnika Sokhi & Abhijit Lele / Mumbai Feb 15, 2012, 00:02 IST

Every day, between 7.30 pm and 11 pm, a top official of a public sector bank gets text messages from 46 zonal managers. The messages contain details on recovery figures of respective zones, with additional information on ranking of centres, based on recoveries.

The zonal managers have to send these numbers daily. Failure to do so will see an email from the chairman’s office seeking the details. The official says he has been doing this chore daily for the last one year. This helps keep a tab on the accounts which have slipped into the non-performing asset (NPA) category.

This is not a one-off incident. Banks reeling under asset quality pressure have beefed up recovery efforts. And, it has percolated to the ground level. Branch level staff are also being deployed for collection of dues.

“We have a recovery team of about 200 employees. Of this, a majority were redeployed from other departments in the third quarter,” said B A Prabhakar, chairman and managing director of Andhra Bank. The bank is targeting a recovery of at least Rs 500 crore this quarter through its in-house team.

The last two quarters of a financial year have always seen a flurry of activity for credit deployment. However, the situation is different this year. With the slackening of credit demand due to high interest rates, hectic activity is being seen on meeting recovery targets.

Lenders are also resorting to referring bad accounts backed with securities to Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) processes.

Nupur Mitra, chairperson and managing director at Dena Bank, said the bank was using SARFAESI and one-time settlements in a big way. “We are also holding massive lok adalats for small accounts,” said Mitra. The bank has deployed clerical staff and nodal officers to do the task.

In rural areas, some banks are asking customers, while extending fresh loans, to at least pay the minimum interest to avoid the loan slipping into the non-performing category.

Bankers say since asset quality pressure is more in the agriculture and small and medium enterprises (SME) segments, maximum recovery efforts are given in these two categories.

State Bank of India (SBI), the country’s largest lender, which had gross NPAs of Rs 40,000 crore at the end of December, has seen 19 per cent of its bad loans in the farm sector and 28.7 per cent in the SME sector. SBI’s cash recovery and upgradation in the December quarter was about Rs 2,000 crore, compared to Rs 1,430 crore in the year-ago period.

The thrust on recovery also comes at a time when not much activity is seen in the stressed asset sale market, after RBI issued guidelines in October 2007, stating banks while selling NPAs, have to work out the net present value of the estimated cash flow associated with the realisable value of the available securities net of the cost of realisation. The sale price, generally, should not be lower than the net present value.

“We were able to recover 100 per cent of principle in accounts, where the offer from asset reconstruction companies was at 30 per cent,” said Sounadra Kumar, deputy managing director, SBI. “Given this experience, the preference is for in-house effort than sale of bad loans,” she added.