Strike by Bank Staff on 22nd and 23rd August,2012

The All India Bank Employees’ Association (AIBEA), which represents the employees of the public-sector banks, has threatened to go on a two-day strike on 22, 23rd of August.

If they strike, it will have a major impact on the banking industry because the banks will remain close on August 19 as it is a Sunday and August 20 is Eid.

AL Madhuraj, zonal president, Bhopal circle, SBI Award Staff Association, said,

“We have hinted at the strike so as to ensure that it must have the maximum impact on the country’s economy.”

C. H. Venkatachalam, General Secretary of the All-India Bank Employees Association, said bank employees have also been asked to be ready for an ‘instant protest strike’ if the Government goes ahead with the passage of the Banking Laws (Amendment) Bill in the monsoon session of Parliament.

The leaders of bank staffers’ association, United Forum of Bank Unions (UFBU), are holding talks with Indian Banks’ Association (IBA) to press for their various demands.

The main issues include settlement of pending demands, stopping unilateral implementation of Khandelwal Committee Recommendations (on human resource issues), a freeze on outsourcing of bank jobs, a hold over banking sector reforms and non-closure of rural branches.

Chidambaram askes the IBA to look into revitalising the home loans.

Finance Minister P.Chidambaram asked the Indian Banks’ Association to set up a group to look at revitalising the home loan sector.This group will suggest solutions to meet the increasing demand for home loans, issues related to incomplete housing projects, and ready built but vacant houses.

“Housing loan is a complex issue,” he said. “What I have heard is that there are nearly 5 lakh houses that are fully built but lying vacant in Mumbai.”

Interest costs have increased significantly in the past couple of years, as the Reserve Bank has cut policy rates just once (in April 2012) after 13 hikes since March 2010 to contain inflation.

He asked banks to cut interest rates and keep EMIs at affordable levels to encourage sale of consumer durables. He said that this will bring more business for the banks and support the consumer durables business.

Chidambaram also said that no deserving student should be denied an educational loan.He added that if it’s discovered that a student’s application for education loan has wrongly been rejected by a branch on more than five (and up to 10) occasions, then the branch manager of that particular branch would be penalised.

Banks were also asked utilise their ATMs not just as cash dispensers, but also cash as acceptors.They were also asked to double the number of ATMs in the next two years.
Emphasising on the need to put more cash in banks, he said that work has begun to ensure that apart from ATMs, there are machines installed in markets and public places, where people can deposit cash.

“Cash accepting machines would enable shopkeepers to immediately deposit their daily earnings with banks rather than waiting for the next day to do so,”

Chidambaram told the media after a meeting with heads of public sector banks.

Public Sector Bank’s increasing NPAs is very marginal – FM

New Delhi, Aug 18: Finance Minister  P. Chidambaram said that the increase in non-performing assets (NPAs) of public sector banks (PSBs) in the last fiscal is marginal  and there is nothing alarming about it.

“NPAs have risen marginally for the year ended March 2012. The situation is not alarming. NPAs reflect a slowdown in the economy, but it is very marginal,”

Chidambaram told reporters here after meeting with chiefs of PSBs.

“For all the public sector banks, their NPAs for the year ended March 2012 stood at 3.17 percent. I am confident as the economy picks up we will be able to improve the NPAS. Their is enough profit for taking care of gross NPAs.”

PSBs’ NPAs have gone up from 2.3% in 2010-11 to 3.3%  in 2011-12.

In its monetary policy review last month The Reserve Bank of India (RBI) had lowered its growth projection for 2012-13 to 6.5% from the earlier estimate of 7.3%.

Chidambaram stressed on the fact that the investment revival is still a challenge.

“Reviving investments is a key challenge for us. (Investor) sentiment is not the only issue…sentiment will change with other issues…once we get the investment engine started, I think many of our problems can get resolved,”

Speaking about the health of banks he said

“No banks in India have failed in terms of parameters in which we measure health in banks. All banks are in good health.”

He also added that banks have been advised to enable ATM machines as not just cash disbursing machines but also cash accepting machines.

SBI’s rising NPA’s causing concern

State Bank of India, India’s largest bank has posted a 137 per cent rise in its net profit at Rs.3,752 crore at the end of June quarter.  However fresh NPAs of Rs.10,844 crore were added to the bank books which took the gross NPAs to cross Rs. 47,000 crore.

SBI’s net non-performing assets (NPAs) rose to 2.22 percent of total loan book, against 1.61 percent a year ago. An increase of gross NPA to almost 5 percent from 3.5 percent a year earlier has shocked the market.

In terms of value, the net NPAs rose to Rs 20,324 crore (2.22 percent of loans) during the June quarter, from Rs 12,435 crore (1.61 percent). Similarly gross NPAs rose to Rs 47,156 crore (4.99 percent) at the end of the first quarter, as against Rs 27,768 crore (3.52 percent) a year ago.

Brokerages like Kotak Securities, Emkay Global and Motilal Oswal Securities have termed the numbers on the bad assets front as disappointing and expressed concerns about the asset quality of the nation’s largest lender. Emkay Global also recommended investors to reduce the stock from its portfolio on the back of rising NPA numbers.

Concerns over the  massive increase in NPAs pushed SBI stock down almost 5 points to Rs. 1,877.55 on the BSE.  The stock finally settled 4.26 per cent lower at Rs 1887.95.

Mr. Pratip Chaudhuri, SBI chief said

“We think the eventual loss on the total restructured book will be to the extent of 3 per cent of the book (Rs 1,000-1,100 crore). That is the potential damage or loss we expect on the restructured portfolio.”

In a press conference he said

“Our profit is the second largest by any Indian company after Reliance industries at Rs 4,475 crore. The stress in the economy is percolating to companies and it is showing up as NPAs in the bank’s books. But we expect to write back about Rs 2,000 crore from a hydel power project, whose accounts are standard but classified as NPA because the plant is yet to start operations due to lack of environmental clearances.”

SBI reported a credit growth of about Rs 53,000 crore. Of which Rs 23,000 crore came from the domestic book. Of this, Rs 10,000 crore was advances to petroleum companies and Rs 3,000 crore to telecom companies. Retail loans accounted for about Rs 8,000 crore.

Hemant Contractor, deputy managing director of international operations, said, “The book has grown quite healthy. The total international book is about $ 26 billion and NPAs on the book were only to the tune of $580 million, mainly from some tourist resorts in Mali.”

 

Acts & Rules

Not too long ago debt collection in India, was treated just as an legal issue rather than revenue generation method. Litigation was the only tools which the banks had to recover the due amount, whose main limitation was the large amount of time taken. Reserve Bank of India (RBI) which regulates the banking industry encourages banks to shift bad loans off their books more quickly because they will be required to hold more capital against risky assets that may default.

It was foreign banks who first introduced the concept of specialized debt recovery services. Soon such services were outsourced to specialized agencies whose main services was debt collection services.

As India began to grow in the global service sector the domestic Banks also adopted outsourcing as an efficient business tool.

In the past Debt collectors had a lot of freedom. After various reports of collectors embarrassing, harassing or humiliate debtors by adopting extra-legal measures the courts had to step in by laying down guidelines for the industry to follow.Soon after The RBI acknowledged the need of regulating the collection agencies and laid down its own guidelines for the banking industry to follow

The following are the core points of the collection process laid down by the RBI.

1. DSAs/DMAs/Recovery agents to get minimum 100 hours of training.
2. Recovery agents should call borrowers only from telephone numbers notified to the borrower.
3. Each bank should have a mechanism whereby borrowers’ grievances with regard to the recovery process can be addressed.
4. Banks are advised to ensure that contracts with recovery agents do not induce adoption of uncivilized, unlawful and questionable behavior or recovery process.
5. Banks are required to strictly abide by the codes pertaining to collection of dues.

However these guidelines only address the problem of debtors’ harassment. Every bank is grappling with the non-paying accounts, known as Non Performing Accounts (NPA). The problem has grown to enormous proportion.

In order to deal with these accounts and induce fast recoveries by the banks The Debt Recovery Tribunals(DRT) were set up in 1993. Soon it became obvious that the DRT did not have the desired result. The NPA’s were not being processed fast enough simply due to the large number of cases.

In order to solve this problem the government passed the Scrutinization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) where the banks were given special powers to liquidate security given by the borrower for recovery of their dues.

List of laws and acts passed to regulate and govern the debt recovery process are:

THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993

THE SECOND SCHEDULE TO THE INCOME TAX ACT, 1961

THE SECURITISATION & RECONSTRUCTION OF FINANCIAL ASSETS & ENFORCEMENT OF SECURITY INTEREST ACT, 2002

THE ENFORCEMENT OF SECURITY INTEREST AND RECOVERY OF DEBTS LAWS (AMENDMENT) ACT, 2004
THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985

THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST (REMOVAL OF DIFFICULTIES) ORDER, 2004

DEBTS RECOVERY TRIBUNAL (PROCEDURE) RULES, 1993

DEBTS RECOVERY APPELLATE TRIBUNAL (PROCEDURE) RULES, 1994

PROCEDURE FOR DISTRAINT BY ASSESSING OFFICER AND TAX RECOVERY OFFICER

DEBTS RECOVERY APPELLATE TRIBUNAL (FINANCIAL AND ADMINISTRATIVE POWER) RULES, 1997

DEBTS RECOVERY TRIBUNAL (FINANCIAL&ADMINISTRATIVE POWER) RULES, 1997

THE DEBTS RECOVERY APPELLATE TRIBUNAL (PROCEDURE FOR APPOINTMENT AS CHAIRPERSON OF THE APPELLATE TRIBUNAL) RULES, 1998

THE DEBTS RECOVERY TRIBUNAL (PROCEDURE FOR APPOINTMENT AS PRESIDING OFFICER OF THE TRIBUNAL) RULES, 1998

THE SECURITISATION COMPANIES AND RECONSTRUCTION COMPANIES (RESERVE BANK) GUIDELINES AND DIRECTIONS, 2003

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.

 

How do I participate in a Bank Auction?

Beginners Guide

Do you know that over eleven thousand auctions were conducted in 2011. It is  estimated that NPA’s in India will exceed Rs.2,00,000 crores  (49% increase) by the end of 2012.

This presents a huge opportunity for those who are willing to spend a little time and effort to learn and understand the new market,  that is becoming available.

Since we have launched FORECLOSUREINDIA.COM two and half years ago,  we have listed over thirty four thousand auctions across 34 city’s in India.

We have launched this blog as a way of providing more information to you. We have also started the Beginners Guide.

In the coming few weeks, we will be updating The Laws,The Acts, The Information a beginner will need to understand the Foreclosure market in India.