Decrypting The Wilful Defaulter Tag

Calcutta High Court dismisses plea, paving the way for UBI to declare the company and its chairman wilful defaulters.

United Bank of India (UBI) declared Kingfisher Airlines, Mallya himself and three directors of the company – Subhash R Gupte, Ravi Nedungadi and Anil Kumar Ganguly – as wilful defaulters.

Kingfisher Airlines in July 2014 moved the Calcutta High Court, two months after the bank had in May 2014 identified it and Mallya as wilful defaulters. The court last week dismissed the plea, paving the way for UBI to declare the company and its chairman wilful defaulters.

Here we will examine the Identifying and declaration of wilful defaulters by Bankers and the various penal measures imposed against such declared “Wilful Defaulter”.

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ICRA: NPA’s of PSU banks to touch 4.6% in FY’15

ICRA: NPA's of PSU banks to touch 4.6% in FY'15

ICRA an independent investment information and credit rating agency estimates that public sector bank’s gross non-performing assets (NPAs) to stand at up to 4.7 per cent at the end of this financial year, compared with 4.4 per cent at the end of FY14 it expects public sector banks’ gross NPAs to be at 4.4-4.7% as on March 31, 2015.

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Income Tax Departments may no longer have first shot in NPAs

It department India

The government is planning legislative changes to enable secured creditors having first right over defaulters’ assets to exercise the same, without being interrupted by the Income Tax Departments. The idea is to make use of the overriding nature of the Sarfaesi Act to virtually ensure that a lender gets to recover dues from a defaulter before others.

The proposed amendments include a provision to classify central and state authorities handling income tax, excise and value added tax as well as municipal corporations as secured creditors, so that the moment a taxpayer defaults, the authorities would need to register their charge on the assets. However, if the company has already taken a loan, the lender would have already registered his charge on the assets, giving the tax authorities only second charge on the assets.

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Lean Startup Machine at Hyderabad

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http://epaper.thehansindia.com/PUBLICATIONS/THEHANSINDIA/THI/2014/06/10/ArticleHtmls/10062014103001.shtml?Mode=1

 

LEAN STARTUP MACHINE AT HYDERABAD

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How Foreclosures Affect Your Health

A new study finds that a foreclosure next door or nearby in the neighborhood can elevate your blood pressure.
By  SANETTE TANAKA  June 5, 2014 9:11 p.m. ET

RBI will set NPA guidelines rules Gujarat HC

RBI-Tower-Mumbai

The Gujarat High Court has restored the Reserve Bank of India’s power to decide the period after which a bad loan can be called a non-performing asset (NPA).

Till 2004, RBI had set the NPA period for banks at 90 days, and at 180 days for Non Banking Financial Companies. But with the amendment, the financial institutions became free to have their own regulations for NPA. The NPA period was decided separately byeach firm.

The High Court’s ruling came on petitions filed by several defaulters of banks and NBFCs who had questioned every institution deciding its own NPA period, calling it violation of right to equality.

The bench of Chief Justice Bhaskar Bhattachrya and Justice J B Pardiwala said that the Section 2(1)(o) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act is held unconstitutional.
The High Court also observed that Parliament was wrong in taking the power to decide NPA guidelines away from the RBI. Before the amendment in 2004 to the Act, the RBI was the regulator for the banking, non-banking institutions and securitization agencies for deciding the period after which the loans can be treated as the NPA.


Further Reading – MoneyControl

FinMin to PSBs:Increase recovery of bad loans

Increase Recovery

The finance ministry has asked public sector banks (PSB) to increase the usage of Sarfaesi Act provisions to quickly recover bad loans.

Data for 2012-13 showed that out of the three methods for NPA recovery — Sarfaesi Act, Debt Recovery Tribunals (DRT) and Lok Adalats – Sarfaesi Act route was the most effective. In 2012-13, around Rs 18,500 crore was recovered through the Sarfaesi Act route, while DRTs helped in the recovery of just Rs 4,400 crore and Lok Adalats only Rs 400 crore.

Under the Sarfaesi Act, lenders have the power to enforce the security interest by taking possession of the assets from the defaulting borrower without court intervention, following the expiry of a 60-day notice period on the loan being classified an NPA.

The ministry has now said wherever possible the PSBs must exercise their rights under Section 13(4) of the Sarfaesi Act, which empowers the lenders to take possession of the secured assets of the borrower (whose accounts have turned NPA) and sell the assets before their value deteriorates. The section also empowers lenders to takeover the management of the business of the borrower and sell the assets if needed.

It also wants PSBs to adopt the latest sophisticated risk management tools (RMT) to effectively measure risks in lending and price loans accordingly so that there is an improvement in the asset quality. These were measures suggested by the new financial services secretary GS Sandhu to the PSB chiefs in a recent letter, banking industry sources told FE.

The ministry also wants PSBs to ensure that the companies do not divert loans for purposes other than the one for which the loans was taken. It has also pointed out the need to have separate RMTs for retail, wholesale, infrastructure and big-ticket loans.

The concern is because of the many instances of ‘quick mortality’, where within six months of the bank extending the loan, the company has become sick.

Further Reading – The Ffinancial Express

Top 50 NPA accounts of PSBs now being monitered by Finance Ministry

India_rupee_notes

The finance Ministry has now increased the no, of NPA accounts it monitors to the top 50 from the previous top 30. It has alsoasked the banks to submit an an action-taken report on recovery for the ‘top 50′ NPA accounts as on December-end 2013.

At June-end 2013, gross NPAs with the top 30 accounts of 26 PSBs were worth R63,671 crore, which is around 35% of their total gross NPAs of R1,82,829 crore.

In the last quarterly meeting to review the performance of PSBs and financial institutions, finance minister P Chidambaram had expressed concerns over high NPAs in two segments — large corporates and small industries. The ministry had in October last year asked PSBs to set up a separate vertical headed by an officer of the rank of general manager for recovering money from bad loans.

GS Sandhu, The the new secretary of department of financial services (DFS), also sought a list of wilful defaulters and findings of prima facie diversion of funds by such borrowers. 

Gross NPAs of PSBs had surged to 5.17% of their advances in December-end 2013 from 3.84% at March-end 2013 (and 4.18% in end-December 2012) while their restructured assets increased to 7.44% from 7.18% during the period. A harder look at the NPA data reveals that at December-end 2013, maximum NPAs were in the small and medium enterprises loan segment with 7.21% of advances while agriculture loan NPAs were at 5.99%. NPAs in the corporate loan segment were 5.28%. In retail loans, NPAs were 2.74% and, in real estate, they were 1.83%.

In a report released on Thursday Fitch Ratings expressed concerns over stressed assets in India compared to other Asian emerging markets. Fitch said it “expects Indian banks’ asset quality to weaken further, with stressed assets (NPAs and restructured loans) to rise from 10% (at mid-2013) to around 15% during FY15 (by March 2015).”

Further Reading – Indian Express

Non-performing assets a big challenge: S Viswanathan

Non-performing assets will go up for sometime before it comes down: S Viswanathan, MD, SBI
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Admitting that non-performing assets (NPAs) in the banking sector is a big challenge, SBI Managing Director S Viswanathan said the NPAs would start looking up once the economic situation gets better.

“Though the NPA stress will continue, it would start looking up in six months after the economic scenario improves,” the managing director (associates and subsidiaries)

at SBI said at an event organised by XLRI here today.

“It will go up for sometime before it comes down,” he said stating that NPAs would not cripple the prevailing banking system.

It is unfortunate to know that education loan contributed 20 per cent to total non-performing assets, he added.

Viswanathan said the country’s largest lender has taken adequate steps to recover loans.

In the rural and semi-urban areas, we have enough pportunities to grow, he added.

Viswanathan also shared plans to reach out to people in remote areas lacking connectivity and accessibility. He said there is a need to bring more and more poor people in rural pockets under banking system by adopting new technologies and electronic means.

The banking sector has opportunities as well as challenges to address, he said while emphasising the need for financial inclusive.

Appreciating PSU banks’ performances, he claimed that banking and insurance sectors were the only sectors where public sector firms continue to perform better than private players.

Viswanathan also spoke on proposals such as single demat account for all investments and credit cards for school students (above class 8th) to make them aware with the banking system.

Highlighting the growth of banking business since independence, he said the sector is currently valued at Rs 115 lakh crore and expected to more than double at Rs 288 lakh crore by 2020.

Viswanathan further said that about 70 per cent of business is being done by PSU banks, which were being accused of not providing the king services provided by the private banks.

He said the SBI group (SBI and its associates) holds 22 per cent of the market share in the country.

http://www.financialexpress.com/news/nonperforming-assets-a-big-challenge-s-viswanathan/1233667

Pre-approved home loan & advantages.

  • What is a pre-approved housing loan?
    It is essentially an in-principle sanction given by a bank for a particular loan amount. A fairly robust process is followed by the banks to determine the loan amount. They will require you to submit a lot of information such as income-tax returns, bank account statements, income proof, salary slips, identity proof, and Pan details among various other things. Banks will also obtain data from CIBIL to check the credit history of the individual.
    Once the checks are in place and the bank pre-approves the loan, it will hand over a letter stating that an in-principle approval of a particular home loan amount has been granted and will be valid up to a particular period. Some banks will also state the rate of interest at which the loan will be provided, the rationale being the interest rate at the time of pre-approving the loan should be applicable. Please note that the pre-approved loan is valid only for a particular period- in most cases it is six months, post which the individual will have to go through the process again.
    Is the bank pre-obliged to provide the loan?
    Banks are not obligated to provide the loan as banks clearly state that the in-principle approval is subject to verification of property documents and the property itself.
    Does it come free of cost?
    Several banks do charge a pre-approval loan processing fee which is refunded if the loan is taken; on the other hand some banks do not charge any fee. Do evaluate your exact need before you opt for a pre-approved loan, it should not be a scenario where you are unable to locate the house of your choice for purchase within the stipulated period of six months.
    If the bank charges a processing fee, then that would be an incurred loss for you. Also, interest rates might change depending on market conditions during the time of the actual loan disbursal, which will not happen until you zero in on the property and the property documents are verified by the bank. Opting for a pre-approved property with a pre-approved loan might enable a quick home purchase process, the pre-approved status for your loan asserts your credibility and repayment capacity while the same for the property indicates the credibility of the builder.

Advantages of a Pre-approved Loan over Regular Home Loan

The key benefits in this arrangement include:

  • Reduced time for sanction as the preliminary verification of eligibility and credit rating would have been done by the bank and only the second stage of property assessment would be remaining.
  • It provides the customer the freedom to choose the property being sure in his mind that the loan would be sanctioned on application.
  • It also gives the customer some more room for bargaining as it is the bank which is interested in disbursing the loan to him and not vice versa.
  • Since in most cases the pre approval is valid for a period of 6 months it provides adequate time for the customer to choose or wait for the right property.
  • The customer can now bargain better with the property seller as he has the approval advantage already with him. Pre approval demonstrates financial strength of the home buyer which can be used when dealing with brokers.
  • Recently Allahabad Bank has come up with Very good proposal for Pre approved loans.
  • Pre approved loan