Sarfaesi Act for Co-op banks Null and Void – Gujarat HC

Posted by & filed under Acts & Rules, News.

The High Court Gujarat has said cooperative banks cannot use the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi), 2002, for recovery of debts from its defaulters as it clashed with the Banking Regulation Act, 1949.

Yesterday a bench of Chief Justice Bhaskar Bhattacharya and J B Pardiwala, in a common judgement, declared that the central government notification dated January 28, 2003, bringing cooperative societies within the purview of the Act as null and void.

Various defaulters had approached the Gujarat HC after cooperative banks sent them notices under the Act, warning against property seizure as they had defaulted on loan payments. The petitioners had argued The Sarfaesi Act was not applicable to cooperative banks formed under state law, as there already was a mechanism for recovery under those legislations, in this case, the Gujarat Cooperative Societies Act, 1961. Also, the Act was applicable to “a company engaged in banking, and not a cooperative society engaged in banking”, they had said in their petitions, adding there was a conscious exclusion and deliberate omission of cooperative banks from the purview of the Banking Regulation Act.

The petitioners has also relied on observations of the Supreme Court in the case of Greater Bombay Cooperative Bank Limited v/s United Yarn Tex (Pvt) Ltd of 2007, where  the applicability of central Acts to cooperative societies was dealt with, with the apex court overruling the Bombay HC.

It had said central legislation such as the Recovery of Debt Act was not applicable to cooperative societies, as there was a mechanism for recovery under the state cooperative societies Act.

 Business Standard Article

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

Posted by & filed under Updates.

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 Allauctions 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.

 

RBI’s recast norms may push banks’ provisioning up Rs.15,000 cr

Posted by & filed under News.

Last Week RBI issued revised draft policy norms for restructured loans, post the working group guidelines issued in July, 2012. According to the draft norms, banks would need to step up provisioning on restructured loans by 1% from FY14 to 3.75% and to 5% by FY15 on the existing stock of restructured loans.

A report by Bank of America Merrill Lynch has said RBI’s new draft guidelines for restructured loans are likely to hit earnings of banks by at least 3-8% over the next two years. The norms, if implemented, would be applicable to new restructured accounts with effect from April 1, 2013 and in a phased manner for existing accounts.

Loans are commonly restructured to accommodate a borrower in financial difficulty and, thus, to avoid a default.

Restructured loan is a new loan that replaces the outstanding balance on an older loan, and is paid over a longer period, usually with a lower instalment amount.

Crisil Ratings, India’s largest credit rating agency had earlier projected loan restructuring to reach Rs 3.25 lakh crore by March 2013. It observed that the cumulative loan restructuring from April 2011 touched Rs 2.25 lakh crore by December 2012.

It now believes that RBI’s draft guidelines, if implemented in the current form, would increase provisioning requirement by Rs.150 billion between April 2013 and March 2015.

Crisil, however, sees two positives from the guidelines: withdrawal of regulatory forbearance for restructured loans from April 2015 and the tightening of the process of restructuring.

“These stipulations will enhance the confidence of stakeholders in banks’ asset quality and discourage large-scale restructuring activity,” it said in a press release.

Crisil report said that the impact on public sector banks will be greater, as they account for around 85 per cent of the total loan restructuring.

The financial performance of some of the state-run banks already deteriorated in October-December quarter due to provisioning requirement on restructured advances. Banks had to make 75 basis points more provisions at 2.75% on restructured loans during the quarter following RBI’s mandate.

Notice to all visitors of ForeclosureIndia.com

Posted by & filed under Notice.

Recently we have received some calls from people asking us about our Mumbai office. On speaking to them we learned that someone has opened an office in Mumbai and is posting ads for bank auction properties in various real estate portals under the name of “D.R.T. Foreclosure (india) Pvt. Ltd.” and are claiming to be our agents. They are showing foreclosure properties in Mumbai to interested people and are asking them to deposit 30% of the reserve price with them while giving them assurances that they will be able to take possession of the property in 30-45 days.

We would like to emphasize that ForeclosureIndia.com is operated from Hyderabad and has no branches or agents, we have never asked anyone to deposit any amount of money with us for participating in an auction or for a private treaty.

Our domains are

http://foreclosureindia.com

https://bankauctions.in

http://blog.foreclosureindia.com

http://sbi.foreclosureindia.com

Our public contact info is

Phone No’s: 08142000062/3

E-Mail: info@foreclosureindia.com, support@foreclosureindia.com,

If any one contacts you claiming to be from ForeclosureIndia.com requesting you to deposit money please contact us at the above email address.

FDI ceiling in ARCs raised to 74% from 49%

Posted by & filed under News.

The finance ministry on Friday has increased the ceiling for  FDI (foreign direct investment) in ARCs (asset reconstruction companies) to 74 per cent from 49 per cent. However, This is subject to the condition that no sponsor should hold more than 50 per cent of the shareholding in an ARC, either by way ofFDI or by routing through a foreign institutional investor (FII).

Furthermore the finance ministry has replaced the individual 10 per cent investment limit of a single FII in each tranche of SR, the finance ministry has made the ceiling equal to that of FII limit on corporate bonds.

However, the foreign investment in ARCs would need to comply with the FDI policy, including the one related with sectoral caps.

Hence the 74 per cent FDI limit in ARCs will be the combined limit of FDI and FII.

The finance ministry added that the decision was taken after consultation with the stakeholders and the sector regulators.

Originally Foreign Institutional Investors (FIIs) were permitted to invest only in Security Receipts (SRs) issued by ARCs upto 49% of each tranche of scheme of SRs.

 

India Ratings says Proposed RBI guidelines good for NBFCs

Posted by & filed under News.

The Reserve Bank of India (RBI) on 12th issued draft regulations for non-banking financial companies (NBFCs) that could significantly impact their growth and tighten the asset classification and provisioning norms of such firms to bring them on par with commercial banks.

These draft rules aim to classify NBFCs under “exempted” and “registered categories”, based on the size of their assets and deposit-taking status.Based on the recommendations of a working group headed by former RBI deputy governor Usha Thorat, the draft rules stipulate a broader framework on a range of issues relating to entry point norms, business criteria and liquidity requirements, among others.In its report  India Ratings and Research said, “Domestic non-banking finance companies (NBFCs) will benefit from the enhanced corporate governance and disclosures standards and tightened liquidity management requirements proposed recently by the Reserve Bank of India (RBI),”It also said that there would be limited financial impact on NBFCs due to the proposed revisions in asset classification, provisioning norms and higher tier-I capital ratio requirements.The proposed rules are open to public comment until 10 January 2013.

According to the proposed guidelines, NBFCs have to recognise a loan as non-performing asset (NPA) if it is not serviced for 90 days from the present 180 days NPA norm.

The new guideline also proposes to implement 10 percent capital adequacy ratio (CAR) norm for most of the NBFCs.

Referring to the capital adequacy ratio, the report by India rating said, “We do not expect any significant impact on the operating performance of the requirement of a minimum Tier I capital ratio of 10 per cent (current requirement of 7.5 per cent for retail finance NBFCs).”

The draft rules say even government-sponsored NBFCs will need to comply with the new norms.

The draft rules don’t permit NBFCs to accept deposits unless they are rated. Existing unrated deposit-taking NBFCs will be given one year to get themselves rated and will not be allowed to accept any fresh deposits or renew existing deposits, unless they are rated by that time.

All deposit-taking NBFCs, irrespective of their size, will continue to be registered with the central bank while the non-deposit taking ones will be exempted from the central bank’s regulation.

The regulator said all NBFCs with an asset size less than Rs.25 crore “whether accepting public funds or not” will be exempt from its rules.

Defining entry norms, RBI said, “No NBFC shall commence or carry on the business of NBFC without having net-owned funds of Rs.25 lakh or such other amount not exceeding Rs.2 crore as may be specified by RBI.”

According to the draft rules, existing NBFCs should reach a minimum Rs.25 crore of financial assets within a period of two years.

Bank Employees to Strike on Dec 20

Posted by & filed under News.

The banking community in order to protest against the central government’s decision to take up the Banking Law Amendments bill in the ongoing session of parliament, have planned to stage a one day long nationwide strike this week, on December 20 by the employees of all public sector banking institutions.

Around 700,000 employees and officers of the public sector, private sector and foreign banks will strike work all over India on Thursday, an official said in Mumbai on Monday. Work in 27 public sector banks, 12 old generation private sector banks and eight foreign banks shall come to a standstill due to the strike, said Vishwas Utagi, secretary, All India Bank Employees’ Association (AIBEA).

“We are protesting the central government’s move to push amendments to the proposed banking laws bill which is placed before Parliament. We have already served a strike notice to the Indian Banks’ Association,” Utagi told mediapersons.

The President of Jharkhand Pradesh Bank Employees Association, Mr. R. A. Singh, said that the reforms proposed in the bill are not in the best interests of the banking sector of the country. He further added that the bill is aimed to allow easy mergers amongst banks and augment the voting rights of private capital in public as well as private sector banks.

Utagi said ”There is an attempt to close down rural branches and resorting to large number of ultra-small branches, thereby privatising rural banking operations, lack of stringent measures to recover increasing non-performing assets and bad loans.”  Also demanding large-scale recruitment in the banking sector, Utagi said the banking employees are also protesting outsourcing of regular banking jobs, thereby jeopardising permanent jobs and job security.

A massive rally has been scheduled at Azad Maidan in south Mumbai. Bank employees will also take part in rallies and processions in all cities in the country.

Banks moves court to liquidate Deccan Chronicle assets to recover dues

Posted by & filed under News.

Jammu and Kashmir Bank has approached the Andhra Pradesh high court urging it to wind up the Deccan Chronicle Holdings Ltd (DCHL) company, liquidate its assets, auction them and pay its dues to the extent of Rs 52 crore.

The Srinagar based bank in its petition said that it bought a commercial paper (debt instrument) worth Rs 50 crore and the DCHL has not paid the amount so far. The bank is seeking an order from the high court to wind up DCHL under the provisions of the companies Act and sought the appointment of a liquidator under section 450 of the Act. The petitioner asked the court to appoint an official liquidator, and restrain the company by an interim order from “disposing of, transferring or encumbering, alienating or parting with possession of the assets of the Respondent Company”.

Jammu and Kashmir Bank is the fifth firm to file a winding-up petition before the high court against Deccan Chronicle Holdings, seeking liquidation of the company over payment defaults.

IFCI Ltd was the first to file such a petition to recover Rs.27 crore, followed by a Adonis Ltd for recovery of dues worth Rs.128.55 crore, The National Pension System Trust for recovery of dues worth Rs.20 crore and Photon Infotech Pvt. Ltd for recovery of dues worth Rs.5 crore.

Deccan Chronicle Holdings, which publishes English-language newspapers Deccan Chronicle, Financial Chronicle and Asian Age, and the Telugu daily Andhra Bhoomi, has more than Rs.4,000 crore of debt on its books.

Shares of Deccan Chronicle Holdings declined 2.77% to close at Rs.5.96 on BSE, while the benchmark Sensex gained 0.88% to end at 19,339.90 points.

Canara Bank, ICICI Bank Ltd and Axis Bank Ltd have classified Deccan Chronicle Holdings loans as non-performing assets. Canara Bank has an exposure of Rs.330 crore, while ICICI and Axis Bank have Rs.500 crore and Rs.400 crore, respectively.

Canara Bank, which is heading a creditors’ consortium, is conducting a forensic audit on the company’s accounts.

KYC norms to be relaxed to allow Aadhaar card

Posted by & filed under News.

Reserve Bank of India, set to publish a circular allowing the use of Aadhaar Card in the  Know-Your-Customer (KYC) norms in order to simplify the KYC process.

Speaking on this matter, the Deputy Governor of RBI, Mr. H. R. Khan said that in the coming days, RBI could come up with simplified KYC norms and could make Aadhaar the address and identification proof for an individual.

Currently, then Aadhaar card carries a disclaimer that it cannot be used as an identity to conduct banking transactions. Once the KYC norms are relaxed  Aadhaar card can be used as proof of identity.

In the second-quarter review of the monetary policy last month, RBI had proposed to review the KYC norms, for simplifying these within the provisions of the Prevention of Money Laundering Act and according to international standards. RBI had also it would launch a pilot project, using the Aadhaar Card data collected by Nandan Nilekani-headed Unique Identification Authority of India, to authenticate banking transactions at ATMs and merchant terminals.

Finance minister, P. Chidambaram had said that the government plans to route payouts of direct cash subsidy to citizens through the Aadhaar-linked bank accounts with a view to improve the efficiency of government-sponsored programmes.

The government will begin direct cash transfers on a pilot basis to people in 51 districts in 16 states from 1 January 2013, Chidambaram said.

The Deputy Governor of RBI, Mr. H. R. Khan also said that the central bank is contemplating taking policy measures on the matter of International Bank Account Number, which will make the process of bank account portability easy. He said that the central bank is also making efforts to unite post offices and banks through an electronic fund management system. He said that there were ways by which payment system could accelerate the process of financial inclusion.

Moody’s says India’s rating outlook is stable

Posted by & filed under News.

In its annual credit analysis on India Moody’s said that the outlook on its Baa3 rating for India is stable, as it’s economic growth and investment that’s are more than emerging-market averages.

India’s economy has expanded 5.5 percent in the three months through September from a year earlier, Finance Minister P. Chidambaram has a target of holding the government’s fiscal deficit for 2012-13 at 5.3 per cent of gross domestic product, matching the growth rate in the preceding quarter. Economists forecast a 5.2 percent increase in gross domestic product, according to the median estimate in a Bloomberg survey before data due Nov. 30.

Moody’s said the high household-savings rate and a relatively competitive private sector will help boost growth from 5.4 percent in the fiscal year ending March 2013 to 6 percent or higher the following year, it also said

“The rating is constrained by the credit challenges posed by country’s poor social and physical infrastructure, high government deficit and debt ratios, recurrent inflationary pressures and an uncertain operating environment.”

Moody’s notes that although India’s GDP growth remains above that of its rating peer, it has slowed from about 8.4% in FY 2010 and FY 2011 to 5.3% in the first half of 2012. Persistent domestic inflation and wide fiscal deficits precluded domestic policy loosening to combat the global growth downturn over the last year. Starting in September 2012, the government has announced measures to spur infrastructure development, allow increased foreign investment, and rein in the fiscal deficit. However, in Moody’s view, given the delayed timing and still modest scope of these measures, growth may remain subdued in the near term amid continued domestic political uncertainty and a global slowdown.

Last month, Standard & Poor’s warned India still faced a one-in-three chance of a credit rating downgrade over the next 24 months, although it said a series of reform steps launched in September had slightly improved the country’s prospects.

Fitch also has a negative outlook on India. Having faced a series of revenue-raising setbacks, the government is grappling with a widening fiscal deficit that threatens to undermine the country’s credit standing and possibly trigger a downgrade to junk status.