Foreclosureindia.com was established in 2009 and it is a market place for Foreclosure / Bank Auction listings in India and also providing e-Auction services to 18 Banks, i.e. Central Bank of India, UBI, OBC, Lakshmi Vilas Bank, State Bank of Hyderabad, IDBI Bank, Corporation Bank, IOB, Karnataka Bank, ING Vysya Bank, CUB, Religare ARC, IARC etc. for selling non-performing assets though BankAuctions.IN.
HYDERABAD, India – Nov. 11, 2015 – PRLog — Foreclosureindia.com was established in 2009 and it is a market place for Foreclosure / Bank Auction listings in India and also providing e-Auction services to 18 Banks, i.e. Central Bank of India, Union Bank of India, Oriental Bank of commerce, Lakshmi Vilas Bank, State Bank of Hyderabad, IDBI Bank, Corporation Bank, Indian Overseas Bank, Karnataka Bank, ING Vysya Bank, City Union Bank, Religare ARC, International ARC, etc. for selling non-performing assets though BankAuctions.IN. Indian Foreclosures / Bank Auctions Market is transparent and emerging.
Foreclosureindia.com is a market place for BankAuction properties in India since Nov 2009. It is 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. It also gives people a cheaper alternative to the conventional properties from builders and individuals.
Gross non-performing assets of banks in India as on March 2015 stood at 5.17 per cent, while the stressed assets ratio stood at 13.2 per cent, which is nearly 230 bps more than that for the system. Going through the details of annual financial results of public and private sector banks (including old private banks) for 2014-15, it may be noted that the gross non-performing assets (GNPA) of 26 public sector banks (including 19 nationalised banks, State Bank of India and its associates and IDBI) have risen by 22.5 per cent to Rs.2.78 lakh crore against Rs.2.27 lakh crore in the previous financial year.
According to Ministry of Finance, Government of India directives issued during March 2013, all auctions of immovable properties, under SARFAESI Act, 2002, may be carried out through E-Auctions to ensure a free, fair and transparent process. All DRT’s are conducting E-Auctions to sell NPAs.
E-auctions of non-performing assets under SAFAESI act 2002 were started by 27 Banks & Financial Institutions in Nov 2013 with 1301 live properties.
In a span of two years, another 47 Banks started conducting e-auctions of non-performing assets and the number of live e-auctions increased to 3325 in Nov 2015 from 1301 during Nov 2013.
Banks and Financial Institutions are conducting these time based e-auctions through third party e-auction service providers. There are seven e-Auction service providers available in India. “E-publicity” / Digital publicity for foreclosure properties / Bank Auction properties is being done throughforeclosureindia.com for selling properties.
Recently, as a special drive, some of the Banks like State Bank of India, State Bank of Hyderabad and its associates have conducted Mega E-auctions duly making wide publicity. Mega e-auction means all the regional offices and zonal offices etc of that Bank are issuing e-auction notices at a time and conducting the e-auction on one particular day duly following rules.
Similarly, now Canara Bank, is conducting Mega e-auction for selling of 1178 properties across India. All these properties details are available at foreclosureindia.com.
City wise No of NPA’s being Auctioned on 21.11.2015
||No of NPA’s
||No of NPA’s
ADVANTAGES OF BUYING THESE PROPERTIES THROUGH BANK AUCTION ARE:
1.PRICE ADVANTAGE: At least 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.FIXED TIME FRAME: Entire transaction will be over in less than two months period.
5.TRANSPARENCY: 100 % transparent transaction. Any one can participate in e – auctions from anywhere in the world.
6.PROBABILITY: 90% chances of winning in the Bank Auction.
Buying properties in Bank Auctions is an intelligent financial decision. The following are the seven steps required to buy properties in Bank Auctions (https://bankauctions.in/) / Foreclosures (http://foreclosureindia.com/).
i. Read The Auction Notice Carefully,
ii. Verify Documents,
iii. Inspect property,
iv. Make Finances ready,
v. Submit tender,
vi. Participate in Auction,
vii. Get Sale certificate.
1. Read The Auction Notice / Sale Notice Carefully: Advised to take a printout of Auction notice and read the details mentioned in the advertisement carefully and note down the important aspects like contact details, inspection date, reserve price, earnest money deposit ( EMD), cost of auction forms, tender submission time & date, auction date & time and finally e-auction website details.
2. Documents Verification: Enquire with the bank / financial institution about further information of the property. Visit the Bank and see all the documents such as registration documents of the present borrower, link documents, latest encumbrance certificate pertains to the property, approved layout for plot by the competent authority, approved plan for flats / houses by competent authority etc. If required, consult with a solicitor / advocate before the auction. Once this aspect is clear, you can proceed further.
3. Inspection of the Property: Visit the site of the property as per inspection schedule given in Sale notice. Consult people around the property to know the price prevailing in that area. While inspecting the property observe the present physical condition of the property, enquire about the pending property taxes, electricity dues, welfare associations maintenance dues. The property comes as is, as such any pending dues should be added to your consideration price before quoting.
4. Get your Finances Right: Please make sure that you are prepared for the price to be paid for the property. If you have ready cash, you can clinch the deal faster and possess the property fast. If you are thinking of availing a Bank Loan, you may approach some bank for sanction of pre-approval loan to complete the transaction in the specified time frame very smoothly.
5. Submission of Tender: Submit the bid at the specified branch before the due date and time, along with demand draft / Banker cheque as EMD ( earnest money deposit ), copies of purchasers PAN card, photo identity card and residence proof. In most of the cases the EMD amount is 10% of the reserve price.
6. Participating in Auction: Based on the data & statistics of the foreclosure properties / bank auction properties in India, around 60% of the Bank auction properties are unsold, due to various reasons. Around 30% properties are getting one bid only. Around 10% properties are getting two or more bids. In case of E-Auction, please take training from the E-Auction service provider at free of cost, the details of e-auction service provider are available in E-auction notice. Investor will be successful if he/ she is the highest bidder. Investor needs to pay another 15% on the same day of the auction.
7. Sale Certificate & Registration: After payment of the total amount either from own sources or through Bank loan, a sale confirmation certificate will be issued. Investor have to pay the stamp duty and get the property registered in their name. The authorized officer will register the property on behalf of the Bank. After completion of registration, the physical possession of the property will be handed over to the Investor.
All the real estate Investors / NRI investors are invited to utilize this opportunity to buy good properties at much discounted rate.
Bhargav, Managing Partner of Foreclosureindia.com says, “During the last 6 years we have created awareness about Bank Auctions and Transparency by disseminating the information of Bank Auctions.During the next couple of years, we will provide Excellent Experience to sellers & Buyers in Foreclosures market / Bank Auctions market.”
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.
Last Tuesday the Supreme Court on rejected a plea by Kingfisher Airlines against being declared a wilful defaulter, saying it has become infructuous as the Grievance Redressal Committee of Union Bank of India has already passed an order.
A borrower is classified as a wilful defaulter in any of the following events:
- When there is a default in repayment obligations by the unit (company/individual) to the lender even when it has the capacity to honour the said obligations. There is deliberate intention of not repaying the loan.
- When the funds have been siphoned off and not been utilized for the purpose for which it was availed. Further, no assets are available which justify the usage of funds.
- When the asset bought by the lenders funds has been sold off without the knowledge of the bank/lender.
- The funds are not utilized for the specific purpose for which finance was availed but have been diverted for other purposes.
- Further, in cases where a letter of comfort or guarantees furnished by group companies of wilfully defaulting units are not honoured when they are invoked by the lender, then such group companies are also considered to be wilful defaulters.
The decision to tag a borrower as a willful defaulter is the harshest step a bank can take upon any borrower.
Identifying and Declaring wilful defaulters
Bankers have an internal committee, headed by an executive director that examines cases of wilful defaults. The credit monitoring or recovery departments give their reports on borrowers deemed to have defaulted wilfully to this committee. The committee examines the efforts made by the bank to recover the dues, the repayment capacity of the borrower, end use of the funds before identifying an individual as wilful defaulter. The decision taken on classification of wilful defaulters is well documented and supported with evidence
Once a borrower is identified as a wilful defaulter, the bank sends him/her a notice with the reasons for the same. The borrower is generally given 15 days to make a representation against the decision to the grievance redressal committee. This committee is either headed by the chairman and managing director or by the executive director who is not part of the panel on identification of wilful defaulters. The bank declares a borrower wilful defaulter if he fails to offer a proper explanation or avoids the grievance redressal committee hearing repeatedly despite notices.
Banks also send their list of wilful defaulters to RBI, Securities and Exchange Board of India (Sebi) and Credit Information Bureau India (Cibil). This is aimed at preventing wilful defaulters from accessing capital markets and borrowing from other banks and financial institutions. The penal measures include the following:
- No additional facilities will be granted to listed wilful defaulters by banks and financial institutions
- Promoters of companies that have been identified for siphoning of funds, misrepresentation of accounts and fraudulent transactions will be debarred from institutional finance for floating new ventures for a period of five years
- Legal process against wilful defaulters will be initiated. Lenders may initiate criminal proceedings also
- Banks will adopt a proactive approach for a change of management of the willfully defaulting borrower unit.
- Wilful defaulters will not be allowed to take up board positions in any company
Banks need not report cases
- Where outstanding amount due is below Rs 25 lakh and
- Where lenders/Banks have agreed for a compromise settlement and the borrower has fully paid the compromised amount.
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.
Fresh non-perfoming assets or NPAs of public sector banks are estimated to be at 3.5% of advances during the quarter ended June’14, according to a study by ratings firm Icra. Their gross NPAs increased by 20 basis points (bps) to 4.6% during the quarter. Asset quality of private sector banks too continued to remain under pressure as their NPAs also increased by 20 bps to 2.0% during the quarter.
However, there was a significant drop in the number of fresh cases of loans being refered to the corporate debt restructuring or CDR Cell for restructuring during the first of FY’15.
“The rate of generation of fresh NPAs remained elevated for public sector banks (3.5 per cent) and, as result, their gross NPAs increased by 20 basis points to 4.6 per cent in the first quarter of FY15. During the same quarter, the NPAs of private banks increased by 20 basis points to two per cent,”
The Icra study notes that the level of NPAs in the banking system gets understated as a sizeable amount of loans are sold to asset reconstruction companies or ARCs. It says that the gross NPA percentage would have been higher by 20-30 bps if there were no sales to ARCs . But sale of NPAs to ARCs is expected to decline in the rest of the current financial year ending March’15 as the Reserve Bank of India has prescribed that ARCs must invest and hold 15% in Security Receipts (SRs) as against 5% earlier.
The Department of Financial Services in the finance ministry is considering to incorporate in the Sarfaesi Act the ‘principle of first to register’ a lien on the assets of defaulting companies.
The registration has to be with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (Cersai) set up to eliminate instances of multiple lending on the same property.
According to the changes proposed by the government in the Sarfaesi Act, whoever registers their charge on an asset first with the designated central registry will get priority over others in recovering the dues by attaching the assets. Since lenders practically are the first to do such registration (at the time of giving the loan), this would in most cases lead to their lien getting precedence.
The Income Tax Departments role in Recovery by lenders
Currently, the out-of-the-court mechanism under Sarfaesi Act allows secured creditors to take possession of the assets of a firm under liquidation if their dues are not paid within two months of raising demand. However, in practice, tax authorities and municipal corporations often attach the assets of a defaulting company beforehand, which comes in the way of lenders recovering their dues.
The tax departments draw the powers to attach from their respective laws – Income Tax Act, Central Excise Act and the like. As per the new proposal, the provisions of Sarfaesi Act of 2002, which is a relatively new law, will prevail over those of older statutes and will effectively protect the interest of lenders without any amendment to any other law.
The proposed amendments also 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.
Currently, secured creditors include banks, financial institutions, debenture trustees appointed by banks, securitisation companies, asset reconstruction companies and any other trustee holding security. “These changes to the Sarfaesi Act will be a huge leapfrog in terms of reforms in this area. States which agree to this provision may soon be perceived as more investor friendly and therefore would see greater lending by banks and financial institutions,” said an expert in bankruptcy laws.
The changes are in line with international best practices followed by the UK, US, Australia and Canada.
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.
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
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).”
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One of the highlights of the BANCON held in Mumbai was the verbal assault launched on banks’ non-performing assets (NPAs) by RBI, quite clearly out of exasperation. This is a continuation of the point made forcefully by the Governor of RBI when he took over. There are actually two parts to this sordid development. The first is that NPAs have been increasing and that something has to be done by banks quite seriously. The second is the growing phenomenon of debt restructuring, which in a way can be termed an euphemism for the same, padded up to look different. In the olden days, this used to be called ever-greening when banks overlooked NPAs by giving fresh loans. Critics aver that Corporate Debt Restructuring (CDR) is similar in direction though the mechanism is different.
To begin with, let us look at the conventional definition of NPAs. Ever since the economy started slipping, companies have found it difficult to service their loans leading to NPAs’ volume increasing from 2.4% in FY11 to 3.0% in FY12 and around 3.6% in FY13. In absolute numbers, they stood at around R1.9 lakh crore in March 2013. The usual reasons are high interest rates and low corporate performance due to pressure on sales and costs resulting in inability to repay loans or service interest payments. One may assume that there is less of mala fide intent and that the ‘wilful defaulters’ category is not predominant.
The restructuring story is even more interesting. The CDR website shows that the volume of restructured debt has increased continuously, touching R2.72 lakh crore as of September 2013 from R0.9 lakh crore in FY09, and was at R2.29 lakh crore by March 2013. In terms of a ratio as a percentage of total advances, CDR was higher at 4.4%, and even traditionally this ratio has been higher than the declared gross NPA ratio.
The argument given in favour of CDR is that loans have to be restructured when the project cannot take off due to extraneous conditions. We all know that several projects are held up when the government’s policy changes
It is generally accepted that directed lending by public sector lenders is one of the major causes for rising bad loans in the banking system. Gross non-performing loans as a percentage of total advances in the priority sector is close to 5.5%; it is only about 3% for the non-priority sector.
However, given the tricky bye-laws and categories of credit management in the Indian banking system, headline numbers can be misleading. As a presentation made by Reserve Bank of India deputy governor K.C. Chakrabarty at a recent conference shows, Indian lenders have resorted to devices such as technical write-offs and restructuring loans to show a reduction in their non-performing assets.
If one looks at the impaired assets ratio, which also takes into account restructured advances and write-offs, then the asset quality is worse for the non-priority sector. The impaired assets ratio for the priority sector is about 9%, while for the non-priority sectors, it is close to 13%.
The largest beneficiaries of these largesse from lenders have been big firms. About 91% of total restructured loans on 31 March was accounted by large and medium industries. Thus, about 14% of large and medium industry loans have been recast compared with 5.8% of overall bank loans.
The deterioration in asset quality is the highest for the industries segment, and within it large and medium enterprises, a segment which accounts for nearly half of the bank credit. Sectors such as aviation and textiles are the worst offenders.
Needless to say, public sector banks are at the receiving end with their impaired assets ratio at 12.1%, more than double that of the larger private banks. On Monday, Mint published an article titled Who pays when India’s billionaires don’t go bust?
With a majority of these impaired assets being borne by public lenders, who have to repeatedly go with a begging bowl to the government for recapitalization, the answer to that question is clear: it is the taxpayer.