Banking, India: Loans

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[[Category:India |B]]
 
[[Category:India |B]]
 
[[Category:Economy-Industry-Resources |B]]
 
[[Category:Economy-Industry-Resources |B]]
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=Loans=
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==The top borrowers==
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===Cities, 2018===
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[https://timesofindia.indiatimes.com/city/bengaluru/bengalureans-take-most-personal-car-loans/articleshow/67649775.cms  Rachel Chitra, Bengalureans take most personal, car loans, January 23, 2019: ''The Times of India'']
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[[File: Cities that were the biggest borrowers in 2018.jpg|Cities that were the biggest borrowers in 2018 <br/> From: [https://timesofindia.indiatimes.com/city/bengaluru/bengalureans-take-most-personal-car-loans/articleshow/67649775.cms  Rachel Chitra, Bengalureans take most personal, car loans, January 23, 2019: ''The Times of India'']|frame|500px]]
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The highest personal loan ticket sizes are in Bengaluru, at Rs 47 lakh, followed by Mumbai (Rs 40 lakh), Delhi (Rs 26 lakh) and Kolkata (Rs 30 lakh), as per data from 1.6 million loan applications in 2018 with BankBazaar, one of India’s biggest online financial services aggregators.
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In the average ticket size of personal loans taken, Mumbai (Rs 2.79 lakh) was ahead of Bengaluru (Rs 2.66 lakh) and Chennai, Delhi and Kolkata.
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BankBazaar CEO Adhil Shetty said the high number of large loans in Bengaluru is, perhaps, a reflection of larger disposable income and high growth opportunities. He said the city has more first-time salaried borrowers than other metros.
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The data is of those who use the online mode. It’s possible that in some of the other cities, a higher proportion of people choose offline modes.
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In car loans too, the top segment of Bengalureans takes higher loans than their counterparts elsewhere, suggesting they go for more flashy cars. The highest loan ticket sizes came from Bengaluru, at Rs 49.9 lakh, followed by Chennai at Rs 46.8 lakh, and Delhi at Rs 21.8 lakh.
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Highest car purchase by women borrower in 2018 was at Rs 12.9L
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Compared to their urban counterparts, borrowers from tier-2 and tier-3 cities restrict themselves to not spending above Rs 20 lakh for a car. Even when it came to average car loan size, rural and semi-urban borrowers were more conservative and borrowed only up to Rs 5.2 lakh, compared to their urban counterparts, who were willing to shell out Rs 5.7 lakh.
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The highest car purchase by a woman borrower in 2018 was at Rs 12.9 lakh. In personal loans, Bankbazaar data shows the average ticket size in metros was at Rs 2.6 lakh, lower when compared to Rs 2.8 lakh in non-metros.
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“It’s possible urban users have more choices such as credit card, and EMI options for consumer purchases on debit cards, and may not choose a personal loan as their first option,” said Shetty.
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In home loans, Delhiites took the highest ticket sizes (Rs 5 crore), followed by Chennai (Rs 2.2 crore), Bengaluru (Rs 1.5 crore) and Mumbai (Rs 1.8 crore).
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But this trend could only be an indicator of the buying pattern of younger, tech-savvy individuals. An SBI official said, “We get biggest home loan and car loan requests from Mumbai. It’s possible Mumbaikars prefer directly contacting their banker than going through a third-party aggregator.”
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===States, 2019===
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[[File: Disbursement of loans by private lenders, state-wise, as in early 2019.jpg|Disbursement of loans by private lenders, state-wise, as in early 2019 <br/> From: [https://timesofindia.indiatimes.com/business/private-lenders-gain-market-share/articleshow/69095675.cms  April 29, 2019: ''The Times of India'']|frame|500px]]
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'''See graphic''':
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''Disbursement of loans by private lenders, state-wise, as in early 2019''
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Private lenders have expanded their retail lending market share by 10 percentage points across top states in four years. The 15 states listed here account for nearly 90% of the loans. Private banks also disbursed 40% of all advances in FY19 as against 30% in FY15. Nearly 75% of the incremental gains have come from western and southern states.
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==The top lenders==
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===2008-18===
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[[File: 2008-12, PSB banks’ share in lending.jpg|2008-12: PSB banks’ share in lending <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F10%2F13&entity=Ar02905&sk=AAE82DCD&mode=image  October 13, 2018: ''The Times of India'']|frame|500px]]
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[[File: 2013-18, PSB banks’ share in lending.jpg|2013-18: PSB banks’ share in lending <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F10%2F13&entity=Ar02905&sk=AAE82DCD&mode=image  October 13, 2018: ''The Times of India'']|frame|500px]]
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'''See graphics''':
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''2008-12: PSB banks’ share in lending''
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''2013-18: PSB banks’ share in lending''
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===2017===
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SBI, ICICI Bank Are The First Two Lenders
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The RBI added HDFC Bank to the list of systemically important banks, or banks that are considered too big to fail.The other banks on the list are the two largest lenders -SBI and ICICI Bank. Since 2015, the central bank has been identifying banks whose failure would impact the whole financial system.These banks are subject to more rigorous regulation and capital requirement.([http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=TOO-BIG-TO-FAIL-HDFC-Bank-Indias-third-05092017023032 The Times of India Sept 2017])
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==Loans  to gems & jewellery cos==
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[[File: Outstanding bank loans to gems and jewellery, 2014-17.jpg|Outstanding bank loans to gems and jewellery, 2014-17 <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F02%2F19&entity=Ar02106&sk=851520DD&mode=text  Sidhartha, February 19, 2018: ''The Times of India'']|frame|500px]]
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'''See graphic''':
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''Outstanding bank loans to gems and jewellery, 2014-17''
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==Gender-wise size of loans, 2018==
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[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F01%2F23&entity=Ar02815&sk=0FC28BB8&mode=text  Rachel Chitra, Loan sizes higher when women borrow, January 23, 2019: ''The Times of India'']
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[[File: Home loans, city-wise and gender-wise, presumably as in 2018.jpg|Home loans, city-wise and gender-wise, presumably as in 2018 <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F01%2F23&entity=Ar02815&sk=0FC28BB8&mode=text  Rachel Chitra, Loan sizes higher when women borrow, January 23, 2019: ''The Times of India'']|frame|500px]]
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The average ticket size of a home loan when women borrow is significantly higher (Rs 27 lakh) than when a man borrows (just under Rs 23 lakh), according to data from 1.6 million loan applications in 2018 on BankBazaar, one of India’s biggest online financial services aggregators.
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BankBazaar CEO Adhil Shetty said the higher loan amount when a woman applies could indicate it’s a household with two incomes, unlike when a male applies, where he could be the only breadwinner. Banks also have special loan offers for women, with interest rates many basis points (100bps = 1 percentage point) lower than for men.
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When it came to car-buying patterns, the data shows that when a woman is the primary loan applicant, they tend to steer away from big-ticket car purchases. Male borrowers borrowed up to Rs 49.9 lakh for a car, whereas the highest female car loan ticket size was Rs 12.9 lakh.
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But in terms of the average car loan size taken by women, it’s significantly higher (Rs 5.5 lakh) than when men are the sole applicants (Rs 5.3 lakh). “Again, I think when women apply, they are an indicator of a double-income household,” said Shetty.
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This trend of women boosting the household’s purchasing capacity could be seen across metros. The average ticket size of home loans in Delhi for women borrowers was Rs 28 lakh, compared to male borrowers at Rs 24.5 lakh. In Bengaluru, women borrowed Rs 37.9 lakh — higher than men at Rs 36.9 lakh, and in Chennai women borrowed Rs 34.8 lakh compared to men at Rs 30.1 lakh. However, the situation was the opposite in Mumbai, where men borrowed more in home loans at an average of Rs 32.8 lakh compared to women at Rs 29.7 lakh.
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For personal loans, women seem to borrow less than men. The average ticket size for female applicants was Rs 2.7 lakh, compared to men who borrowed Rs 2.8 lakh.
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Women seem to now have the firepower for globe-trotting just as much as men — women’s applications for travel credit cards grew 73%, slightly higher than male applications that increased 71.5%. In lifestyle credit cards too, applications from women grew at a 10.5% rate, compared to men at 8%.
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=Loans: Bad loans=
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==5 business houses alone owe PSU banks Rs. 1.4 lakh crore==
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[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Just-5-business-houses-owe-PSU-banks-Rs-06052016013032 ''The Times of India''], May 06 2016
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''' Adani Group Has Debt Of Rs. 72,000 Crore' '''
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Raising the issue of corporate loans in Rajya Sabha, JD(U) member Pavan Verma said the Adani group had a debt of Rs 72,000 crore -an amount equal to the total debt of farmers in the country. Verma said corporate houses owed about Rs 5 lakh crore to PSU banks and particularly referred to the Adani group, alleging that the company got “unimaginable“ favours. Raising the issue during zero hour, he contended that PSU banks were influenced to give loans to people who were not able to repay them.
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“PSU banks are owed abo ut Rs 5 lakh crore by corporate houses and of this, roughly Rs 1.4 lakh crore are owed by just five companies, which include Lanco, GVK, Suzlon Energy , Hindustan Construction Company and a certain company called the Adani group and Adani Power,“ he said.
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“I want a reply from the government, are they aware of this or are they not. And if they are aware, what are they doing in this matter. One company owes as much as all the farmers of India,“ he further said.
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The amount owed by this group both in terms of its long-term and short-term debt was around Rs 72,000 crore, Verma said, claiming to be quoting from reports. He added that on Wednesday , it was mentioned that the entire amount owed by farmers as crop loans was Rs 72,000 crore.
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“I don't know what is the relationship of this government with this business house. I don't even know if they know them, but the owner of this group (Gautam) Adani is seen everywhere the prime minister has gone, every country , China, the UK, the US, Europe, Japan,“ Verma said.
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“This company has been given favours which are unimaginable. In Gujarat, their SEZ was approved in spite of the high court's strictures,“ he added.
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When deputy chairman P J Kurien warned Verma against making allegations, the JD(U) member said, “I am giving you factual account. It is a high court judgment. It was left to the state government.The UPA government had not approved it and when this government came to power, it was approved.“
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Verma said it did not matter if Adani group had the ability to pay this amount, but in the last 2-3 years, the company's net worth had gone up by 85%.
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== 25% of Rs 8 lakh crore bad debt is from just 12 accounts ==
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[http://timesofindia.indiatimes.com/business/india-business/rbi-just-12-accounts-responsible-for-25-of-rs-8-lakh-crore-bad-debt-with-banks/articleshow/59130795.cms  RBI: Just 12 accounts responsible for 25% of Rs 8 lakh crore bad debt with banks, Jun 13, 2017: The Times of India]
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'''HIGHLIGHTS'''
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Just 12 accounts responsible for 25% of all NPAs with banks
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Lenders will be asked to initiate insolvency proceedings to recover the dues
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The RBI today identified 12 accounts each having more than Rs 5,000 crore of outstanding loans and accounting for 25 per cent of total NPAs of banks for immediate referral for resolution under the bankruptcy law.
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Without naming the defaulters, the Reserve Bank said the lenders will be asked to initiate insolvency proceedings to recover the dues.
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The banking sector is saddled with non-performing assets (NPAs) worth over Rs 8 lakh crore, of which Rs 6 lakh crore is with public sector banks (PSBs).
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The Internal Advisory Committee (IAC), the central bank said, has arrived at an objective, non-discretionary criterion for referring accounts for resolution under the Insolvency and Bankruptcy Code (IBC).
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"In particular, the IAC recommended for IBC reference of all accounts with fund and non-fund based outstanding amount greater than Rs 5,000 crore, with 60 per cent or more classified as non-performing by banks as of March 31, 2016," the RBI said in a statement.
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The IAC noted that under the recommended criterion, 12 accounts with about 25 per cent of the current gross NPAs of the banking system would qualify for immediate reference under IBC, it said.
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The apex bank, based on the recommendations of the IAC, will accordingly be issuing directions to banks to file for insolvency proceedings under the IBC in the identified accounts.
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Such cases will be accorded priority by the National Company Law Tribunal (NCLT).
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== 2012-18: stressed loads==
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[[File: Share of stressed loans, March 2012-September 2018.jpg|Share of stressed loans, March 2012-September 2018 <br/> From: [https://timesofindia.indiatimes.com/business/india-business/improve-job-finance-data-quality-oecd/articleshow/69437448.cms  May 22, 2019: ''The Times of India'']|frame|500px]]
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'''See graphic''':
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''Share of stressed loans, March 2012-September 2018''
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==2013-16: Loans held by ARCs==
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[[File: Total loans held by asset reconstruction companies- 2013-16.jpg|Total loans held by asset reconstruction companies: 2013-16 <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F06%2F09&entity=Ar02106&sk=D5787A51&mode=text  Govt may create ‘bad bank’ to take over PSBs’ NPAs, June 9, 2018: ''The Times of India'']|frame|500px]]
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'''See graphic''':
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Total loans held by asset reconstruction companies: 2013-16
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==2014: loans to coal sector…==
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[[File: banks NPA.jpg| NPAs (non-performing assets) as in 2013, especially bad loans to power sector. Source: [http://epaperbeta.timesofindia.com//Gallery.aspx?id=25_09_2014_025_017_010&type=P&artUrl=Power-sector-bad-loans-may-rise-25092014025017&eid=31808 The Times of India ]|frame|500px]] 
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'''… and scrapping of coal block allotments '''
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''' Power sector bad loans may rise '''
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Mumbai:
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TIMES NEWS NETWORK
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[http://epaperbeta.timesofindia.com//Article.aspx?eid=31808&articlexml=Power-sector-bad-loans-may-rise-25092014025017  The Times of India ] Sep 25 2014
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The Supreme Court verdict scrapping all but four coal block allotments has added to the bad loan headache of the banking industry .
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Although bank exposure to coal mining sector is estimated to be below Rs 20,000 crore, the biggest fear is that coalfuelled power plants may stop producing power and default on loans. Bank exposure to power companies is around Rs 5.16 lakh crore and accounts for 9% of their loans. A large chunk of these depend on coal.
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Shares of leading public sector banks dipped sharply on Monday over fears that their bad loans would rise following the Supreme Court order.
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Bank of India and Canara Bank, which have large exposures to the power segment (relative to their loan book) fell 5.6% and 5%, respectively , to Rs 263 and Rs 358. Punjab National Bank, which is estimated to have the largest exposure to coal mining, fell 4.3% to Rs 927. The State Bank of India, one of the largest lenders to power in absolute terms, saw its share price fall 2.7% to Rs 2,487. Even without the coal block cancellation, several power projects and steel companies are under stress and are undergoing restructuring. Stoppage of fuel to these projects could tip them into the non-performing assets category , considering that imported coal is four times as expensive as domestic coal. Reacting to the SC order, SBI chairman Arundhati Bhattacharya said, “We believe that uncertainty is possibly the worst enemy of growth. We are glad that this is over with the SC verdict on coal blocks allocation. We now look forward for a quick plan of action for ensuring that coal supplies are not disrupted and, thereafter, a swift and transparent bidding process for reallocation.“
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According to IDBI Bank chairman MS Raghavan, the bank has an exposure of close to Rs 2,000 core to the companies affected by the Supreme Court order. The bank is still assessing the impact of the verdict.
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In the private sector, ICICI Bank has loans to power and steel companies that are dependent on coal supply . Earlier in an interview to TOI, Chanda Kochhar, MD & CEO of ICICI Bank, had said it was important to ensure that back-end projects that depend on coal keep producing. “The government has been talking about finding ways of reallocating coal. As long as coal is produced and power and steel plants get it, that ensures the viability of the power project; where it is allocated, who owns it and who mines it is not the primary thing. Banks had mainly extended assistance to either power or iron and steel projects,“ Kochhar had said. While deciding to cancel all but four coal blocks allotted since 1993, The Supreme Court brushed aside Coal Producers Association's (CPA) estimate that Rs 9 lakh crore linked to them would come to naught.
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The CPA, through senior advocate K K Venugopal, had said that loans worth Rs 2.5 lakh advanced by banks and financial institutions would become non-performing assets. It had said that SBI has an exposure of up to Rs 78,263 crore.
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Venugopal had said that apart from huge losses to other PSU banks like PNB and Union Bank, public sector entities like Rural Electricity Corporation and PFC would experi ence an even higher exposure than banks. The financial implication narrated by CPA covered many other aspects.“Huge investments up to about Rs 2.9 lakh crore have been made in 157 coal blocks as on December 2012, investments in the end-use plants have been made to the extent of about Rs 4 lakh crore, which employ 10 lakh people,“ CPA had said.
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The CPA had warned of many other adverse effects -the country's dependence on coal as a primary source of fuel for up to 60% for power generation might result in inflationary trends; 28,000 mw of power capacity would be affected due to de-allocation; closure of coal mines would result in an estimated loss of Rs 4.4 lakh crore in terms of loss of royalty , cess, direct and indirect taxes; coal imports would go up even more in financial year 2016-17 to the extent of Rs 1.4 lakh crore.
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A bench of Chief Justice R MLodha and Justices Madan B Lokur and Kurian Joseph cited arguments of attorney general Mukul Rohatgi to counter adverse economic fallout predicted by CPA. “It was submitted by the AG that all aspects, including the economic implications or fallout of the cancellation of coal block allotments and the possible adverse impact that it may have on other socio-economic factors, have been taken into consideration and it is only after that the affidavit has been filed by the Union of India,“ the bench said.
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==2018/ Loans to the power sector==
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[https://timesofindia.indiatimes.com/business/india-business/rbi-capital-identified-by-jalan-panel-may-back-power-loans/articleshow/68713764.cms  ‘RBI excess capital identified by panel may back power loans’, April 4, 2019: ''The Times of India'']
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The Bimal Jalan committee has to submit its report on the appropriate level of reserves to be maintained by the RBI. According to a report by Bank of America Merrill Lynch, the panel will identify excess capital of $14 billion to $42 billion, which can be used to address stressed loans in power sector.
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The Supreme Court quashed a circular from the RBI forcing banks to initiate insolvency proceedings against defaulting companies. This order has paved the way for restructuring of loans to the power sector. While this is a relief to both lenders and borrowers it does not address the issue. Lenders did not want to start insolvency proceedings as projects were under implementation and would not find takers.
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According to BoAML, the finance ministry should be able to form a much-needed public sector asset reconstruction or asset management company that manages banks’ nonperforming assets (NPAs) in power with the Supreme Court ruling against the February 12 RBI circular, which had adopted a one-size-fits-all approach. This had also been proposed by RBI deputy governor Viral Acharya earlier.
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“Our power analyst estimates that auctioning these power NPLs will need a haircut of 75%, that is $9 billion (Rs 63,000 crore) more. Banks can then transfer the $9 billion of cleaned-up power NPLs to the ARC/AMC. This can be done by either the government recapitalizing banks by an additional Rs 7,000 crore or it can deploy excess RBI economic capital set to be identified by the Jalan committee next week,” said Indranil Sen Gupta, India Economist with Bo-AML.
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==Priority sector more creditworthy than corporates/ 2016==
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[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Loans-to-priority-sector-turn-out-more-creditworthy-04092017015049  Satyanarayan Iyer, Loans to priority sector turn out more creditworthy than corporates, September 4, 2017: The Times of India]
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[[File: NPA reduction due to write-offs, 2011-17.jpg|NPA reduction due to write-offs, 2011-17; [http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Loans-to-priority-sector-turn-out-more-creditworthy-04092017015049  Satyanarayan Iyer, Loans to priority sector turn out more creditworthy than corporates, September 4, 2017: The Times of India]|frame|500px]]
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Priority sector loans, long seen as a socialist burden on banks, have turned out to be more credit worthy than advances to large corporates. During April-December 2016, banks had written off loans worth Rs 35,587 crore to large industries as against write-offs of Rs 32,445 crore of advances in the priority sector.
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Also, banks could recover only Rs 16,717 crore from large industries who are in default as against Rs 25,070 crore from the priority sector.
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An RBI response to a Right to Information (RTI) filing shows that inability to make timely recoveries from large businesses is forcing banks to take a huge hit on their earnings. Banks had written off Rs 68,032 crore of bad loans in the first nine months of FY17 -close to 97% of total write-offs in the whole of FY16. Given that the fourth quarter writeoffs in FY17 had been significant, the total write-offs in the last three years have crossed Rs 2 lakh crore.
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CARE Ratings chief economist Madan Sabnavis said, “After the asset quality review norms were put in place by the RBI, bad loans and provisioning have risen steeply . As banks started realising a part of these bad lo ans cannot be recovered, they also started writing off more to clean their balance sheets.“ He added the situation is a result of bad lending decisions and governance issues among banks, which was supported by the “system“.
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In the first nine months of FY2017, scheduled commercial banks (SCBs) wrote off Rs 35,587 core worth of loans to large industries, compared to Rs 6,628 crore written off by lenders to farm loans, Rs 8,106 crore toward MSME loans and Rs 17,711 crore wrote off to the other priority sectors.
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A loan write-off does not mean that the borrower goes scot free as all recovery proceedings continue. A balance sheet write-off indicates that even if the borrower does not repay , the bank has set aside own funds to repay depositors. Similarly , the farm loan waiver announcement by state governments is not included in `write-offs' by banks. “The loan is always there in the books. They are just moved from sub-standard to standard when the government waives and makes good the loan outstanding. Only that amount of the agriculture loan is written off which is not made good by the government,“ said a senior public sector banker in charge of priority sector banking.
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==2017: Bad loans at record Rs 9.53 lakh crore==
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[https://timesofindia.indiatimes.com/business/international-business/exclusive-no-respite-for-indian-banks-as-bad-loans-hit-record-146-bln/articleshow/61030217.cms  Bad loans hit record Rs 9.53 lakh crore, up 5.8% in last six months, Oct 11, 2017: The Times of India]
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'''HIGHLIGHTS'''
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Unpublished data show that bad loans in banks have reached a record Rs 9.53 lakh crore by end-June
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The stressed loans have risen 5.8 per cent in last six months
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Stressed loans as a percentage of total loans reached 12.6 per cent at end-June, the highest level in at least 15 years
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The bad loans of banks hit a record Rs 9.53 lakh crore at the end of June, unpublished data shows, suggesting Asia's third-largest economy is no nearer to bringing its bad debt problems under control.
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A review of Reserve Bank of India (RBI) data obtained through Right To Information (RTI) applications show banks' total stressed loans - including non-performing and restructured or rolled over loans - rose 4.5 per cent in the six months to end-June. In the previous six months they had risen 5.8 per cent.
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While banks remain the main source of funding for companies in India, the stubborn bad debt problem has eaten into bank profits and choked off new lending, especially to smaller firms, at a time when an economy that depends on them is stalling.
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The GDP grew at its slowest pace in three years in April-June quarter - a concern for the government which faces elections in 2019 and has pledged to create millions of new jobs before then.
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Banks are having to take higher provisions to account for more defaulters being pushed into bankruptcy and margins are likely to be squeezed further by proposed new rules to encourage commercial banks to pass on central bank interest rate cuts.
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To be sure, the bulk of India's bad loans are in the state banks and stem from lending to large conglomerates, especially in steel and infrastructure. But analysts say the rise in bad loans among small firms, and even retail borrowing, is worrying and will do little to encourage new loans to help fuel growth.
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"On the corporate side, we think it's a recognition cycle which is nearing an end," said Alka Anbarasu, senior analyst at Moody's Investor Service, referring to more bad loans being recognised as such, as banks come under pressure from the RBI and other regulators. "But it's really those data points beyond corporate that are causing some worry."
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Anbarasu forecast weak quarters ahead for banks before profitability picks up, and several senior bankers from public sector lenders - which account for more than two-thirds of Indian banking assets - agreed the months ahead would be strained.
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Stressed loans as a percentage of total loans reached 12.6 per cent at end-June, according to the RBI data, the highest level in at least 15 years.
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'''Higher provisions, weaker loans'''
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Part of the issue for banks and the government is a strict provisioning regime: the RBI wants banks to provide for at least 50 per cent of the secured loans to companies taken to bankruptcy proceedings, and 100 per cent for the unsecured part.
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A dozen of the biggest such cases account for nearly Rs 1.78 lakh crore, or a quarter of total non-performing assets.
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For those companies, banks will need to provide Rs 18,000 crore on top of existing provisions, according to July estimates from India Ratings and Research, the local affiliate of Fitch Ratings.
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More than 20 other sizeable companies are at risk of being taken to bankruptcy court.
 +
 +
Bankers say these and other pressures - including rising government bond yields that forced banks to post mark-to-market losses - have added to the squeeze, and hit new loans.
 +
 +
According to RBI data, new loans grew at just about 5 percent in the year to March, the lowest growth rate in more than six decades. Several banks have already cut back their loan books to conserve capital.
 +
 +
"What are they (RBI) thinking while they're taking these steps all at the same time?" said a treasurer at a state-run bank, who didn't want to be named due to the sensitivity of the issue. "Do they want banks to wind up their businesses, or do they want to save the banks?"
 +
 +
Treasury income accounted for 22.7 per cent of banks' operating profits in the last financial year, doubling its share from a year earlier, India Ratings estimates.
 +
 +
"The almost zero treasury income will hit provisioning ability and, in turn, make it more difficult for weaker banks to give loans as capital becomes more scarce," said Soumyajit Niyogi, an associate director at the rating agency.
 +
 +
A senior policymaker, who requested anonymity as the discussions are not public, said the government would have to help to sufficiently capitalise the banks.
 +
 +
Fitch Ratings estimates Indian banks will need Rs 4.24 lakh crore of additional capital by March 2019 to meet Basel III global banking rules. Moody's expects the top 11 state lenders alone will need nearly Rs 98,000 crore. The government has just Rs 19,500 crore left in its budget for bank recapitalisation.
 +
 +
"We think capitalisation is the biggest challenge for the banks at the moment, given that earnings will remain subdued and will not support any capital generation," said Moody's Anbarasu.
 +
 +
==2017-18: Wilful defaulters form 14% of PSB bad loans==
 +
[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F01%2F08&entity=Ar01911&sk=69B35F59&mode=text  Mayur Shetty, Wilful defaulters form 14% of PSB bad loans, January 8, 2018: ''The Times of India'']
 +
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[[File: Gross Non-Performing Assets and wilful defaulters, as in January 2018.jpg|Gross Non-Performing Assets and wilful defaulters, as in January 2018 <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F01%2F08&entity=Ar01911&sk=69B35F59&mode=text  Mayur Shetty, Wilful defaulters form 14% of PSB bad loans, January 8, 2018: ''The Times of India'']|frame|500px]]
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''With 53%, Vijaya Bank On Top Of RBI List''
 +
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Around 14% of the bad loans in public sector banks (PSBs) are due to wilful defaulters. The total gross non-performing assets (NPAs) of 21 PSBs stood at Rs 7.33 lakh crore as on September 30, 2017. Of this, Rs 1.01 lakh crore of loans were termed as those in wilful default.
 +
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Wilful defaults have an element of malfeasance as it broadly means that the borrower has reneged on the agreement on usage of funds or has not paid despite having resources.
 +
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Recovery from such accounts are difficult because in many cases the money is siphoned off from the books of the defaulting company and most of them are being fought in courts. Some of the largest cases of wilful default are Kingfisher Airlines, Zoom Developers, Winsome Diamonds and Varun Industries.
 +
 +
Of the 9,025 cases of wilful defaults in PSU banks, lenders have filed cases against 8,423 for recovery of Rs 95,384 crore of NPAs. They have also filed 1,968 police complaints in cases of loan amounts totalling 31,807 crore. In 6,937 accounts, representing an outstanding of Rs 87,458 crore, banks have also initiated proceedings to attach and sell assets under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
 +
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Data released by the RBI in response to a Parliament query shows that Vijaya Bank has the highest share of wilful defaulters in its books. The Bengaluru-based banks had NPAs worth Rs 6,649 crore as on September 30, 2017. Of this loans amounting to Rs 3,537 crore were on account of wilful defaults. Punjab National Bank has the highest share of wilful defaults in its books among the larger banks. Of its bad loans worth Rs 57,630 crore, 25% are on account of borrowers who have deliberately defaulted.
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The implication for a business or promoter being declared a wilful defaulter is that they will never be able to get bank loans as long as they have the tag. For a lender, declaring a borrower as a wilful defaulter is a complicated process with senior bankers having to give a hearing to the borrower. In several cases, courts have ruled against the labelling of the borrower due to shortcomings in the process.
 +
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Among banks with small percentage of wilful defaulters among NPA accounts are Punjab & Sind Bank (4%), Bank of Maharashtra (5%) and Syndicate Bank (5.4%).
 +
 +
As on September 30, 2017, leading corporate houses accounted for approximately 77% of the total gross NPA from domestic operations for banks in India.
 +
 +
==2017-18/ Bad loan write-offs by PSBs surge 140% over their losses==
 +
[https://timesofindia.indiatimes.com/business/india-business/bad-loan-write-offs-by-psbs-surge-140-over-their-losses-in-2017-18/articleshow/64602195.cms  June 15, 2018: ''The Times of India'']
 +
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'''HIGHLIGHTS'''
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This is a double whammy for the struggling PSBs as they had massive write-offs as well as huge losses in the last financial year
 +
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Till 2016-17, 21 state-owned banks made combined profit while in 2017-18, they posted a staggering loss of Rs 85,370 crore, as per the data
 +
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Public sector banks have written off bad loans worth a whopping Rs 1.20 lakh crore, an amount that is nearly one-and-a-half times more than their total losses posted in 2017-18, according to official data.
 +
 +
This is a double whammy for the struggling PSBs as they had massive write-offs as well as huge losses in the last financial year. This is for the first time in a decade that banks have made huge write-offs of bad loans along with booking of hefty losses.  Till 2016-17, 21 state-owned banks made combined profit while in 2017-18, they posted a staggering loss of Rs 85,370 crore, as per the data. 
 +
 +
During 2016-17, PSU banks wrote off non-performing assets (NPAs) worth Rs 81,683 crore as against combined net profit of Rs 473.72 crore.
 +
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SBI alone has written off bad loans of Rs 40,196 crore, nearly 25 per cent of the total write-offs during 2017-18. This was followed by Canara Bank (Rs 8,310 crore), Punjab National Bank (Rs 7,407 crore) and Bank of Baroda (Rs 4,948 crore).
 +
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As per the data provided by rating agency Icra, Indian Overseas Bank has written of NPAs worth Rs 10,307 crore, followed by Bank of India (Rs 9,093 crore), IDBI Bank (Rs 6,632 crore) and Allahabad Bank (Rs 3,648 crore). These banks along with 7 others come under Prompt Corrective Action framework of RBI.
 +
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As per the government data, banks' write-offs stood at Rs 34,409 crore in 2013-14. The figure has jumped nearly four-fold in five years. In 2014-15, the banks wrote off Rs 49,018 crore ; Rs 57,585 crore in 2015-16, Rs 81,683 crore in 2016-17 and hitting a record high of Rs 1.20 lakh crore (provisional) in 2017-18.
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Write-off in banking parlance means that the bank has made 100 per cent provision from its earning against that account. Following this, NPA is no longer part of its balance sheet.
 +
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However, a write-off puts pressure on balance sheet of banks as it erodes operating profit.
 +
 +
Indian banking sector is grappling with mounting NPAs and host of scams and frauds. NPA in the banking sector stood at Rs 8.31 lakh crore as of December 2017.
 +
 +
Weak financials due to mounting bad loans have already pushed 11 banks, out of 21 , under the Prompt Corrective Action (PCA) framework of RBI.
 +
 +
The recent tight prudential norms released by RBI on February 12 have added to the NPA woes.
 +
 +
Interim Finance Minister Piyush Goyal has announced setting up of a committee to give recommendations in two weeks on formation of an Asset Reconstruction Company (ARC) for faster resolution of stressed accounts.
 +
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The committee under Sunil Mehta, non-executive chairman of PNB, will make recommendations for the same.
 +
 +
The finance minister said the committee will consider whether such an arrangement will be good for the banking system and, if any such suggestion is advisable, it will also consider the modalities by which such an ARC should be set up.
 +
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==How ‘haircuts’ help in dealing with bad loans==
 +
[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F07%2F09&entity=Ar01200&sk=F6E1546C&mode=text  July 9, 2018: ''The Times of India'']
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[[File: The banks with the highest NPAs, 2017-18; 2012-18- The ratio of restructured loans to total assets; and; 2012-18- The ratio of gross.jpg|The banks with the highest NPAs, 2017-18; 2012-18- The ratio of restructured loans to total assets; and; 2012-18- The ratio of gross <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F07%2F09&entity=Ar01200&sk=F6E1546C&mode=text  July 9, 2018: ''The Times of India'']|frame|500px]]
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As the government looks to reel in the likes of Nirav Modi and Vijay Mallya, who have sought shelter on foreign shores after leaving behind huge outstanding loans in India, a panel has come up with recommendations to help state-run banks achieve faster resolution of their non-performing assets. A look at these bad loans and how deep the problem is...
 +
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'''How are haircuts a solution to the NPA crisis?'''
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One reason private and foreign banks have a lower level of NPAs is they have the flexibility to cut their losses by selling off assets in a bad loan for whatever it is worth. In the case of public sector banks, selling a loan or a company for less than the outstanding loan was not feasible as it would trigger action by Central Vigilance Commission, Central Bureau of Investigation and Comptroller and Auditor General. It is only now that the bankruptcy code provides a framework for selling assets at a discount to the loan amount (taking a haircut).
 +
 +
'''What caused this pile-up?'''
 +
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Post global financial crisis, RBI and the gover nment relaxed lending nor ms to stimulate the economy and allowed banks to lend more to projects as part of a countercyclical measure. The government also allowed banks to ‘restructure’ project loans that were going into default by giving borrowers more time and more money. Loans of these troubled borrowers were classified as ‘restructured’ and not NPAs.
 +
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'''How much money would banks lose if they took haircuts on NPAs?'''
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Losses reported by banks so far include the part-provisions made on existing NPAs. According to CLSA, the top-32 NPAs facing action under the bankruptcy code account for Rs 4 lakh crore or 45% of total NPAs. CLSA estimates the haircut on these loans are less than 60%. Banks must make provisions for at least half the loan amount in case of bankruptcy.
 +
 +
'''What is the NPA crisis?'''
 +
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NPAs or non-performing assets are loans for which borrowers are unable to meet repayment obligations. Ideally, these should be within 2% of total assets (loans) for banks. Bad loans beyond this level are difficult to manage as banks work with narrow margins and the interest spread they earn is not enough to make up for the losses from defaults. For public sector banks it has reached crisis level with gross NPAs at 14.6% — almost three times the level of 4.9% for private banks.
 +
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'''Why did NPAs blow out in FY18?'''
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In 2017, the new insolvency law came into effect. It provided a resolution mechanism for bad loans, enabling companies to be sold. Earlier under Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, lenders could sell assets but not businesses as a whole. With a mechanism in place, RBI removed restructuring schemes, asking banks to come clean on bad loans. As a result, provisions rose to Rs 3.2 lakh crore in FY18 from Rs 2 lakh crore in FY17, surpassing operating profits of banks.
 +
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'''What are the haircuts that are talked about?'''
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Under the Bankruptcy Code, borrowers unable to repay their dues face insolvency proceedings in the National Company Law Tribunal. Under the insolvency process, a resolution professional is appointed to invite bids for the bankrupt business. The difference between the best bid and the borrower’s total outstanding dues is the haircut.
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==CVC finds many flaws in sale of bad debt/ 2019==
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[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F03%2F18&entity=Ar01705&sk=87B6E5D1&mode=text  Sidhartha, March 18, 2019: ''The Times of India'']
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[[File: The Central Vigilance Commission (CVC) has pointed to several irregularities in transactions involving non-performing loan accounts. Some guidelines which should be followed are mentioned above.jpg|The Central Vigilance Commission (CVC) has pointed to several irregularities in transactions involving non-performing loan accounts. Some guidelines which should be followed are mentioned above <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F03%2F18&entity=Ar01705&sk=87B6E5D1&mode=text  Sidhartha, March 18, 2019: ''The Times of India'']|frame|500px]]
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''Review Points To Several Lapses In Deals, Govt Orders Scrutiny''
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In high season for sale of bad loans to asset reconstruction companies (ARCs), the Central Vigilance Commission (CVC) has pointed to several irregularities in transactions involving non-performing loan accounts, prompting the government to initiate action against errant executives.
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“Instances have come to the notice of the commission, wherein prudence has not been observed, while taking decision on sale of stressed asset to ARCs. Irregularities have been noticed in estimating the value of underlying securities (which) is much higher that the value at which the assets were sold to ARCs, post-sale realisation from assets, management fees and expenses charged by ARCs, etc,” the CVC said after an analysis of 302 cases of over Rs 50 crore from 2014-15 to 2017-18.
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 +
In at least 48 cases, assets were sold to ARCs below the realisable value of securities that the borrower had given as security at the time of availing of the loan. In several cases, banks were found to be fixing the reserve price without factoring in the accrued interest, resulting in banks having to take a deeper haircut, the CVC said in its report to the government. It also said that in case of companies that are sold as a “going concern”, the primary value of stocks and equipment were not factored in, while fixing the reserve price.
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 +
Similarly, in 55 cases, assets were sold within a year of the date of the account turning into a non-performing asset (NPA), without banks initiating recovery action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
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In all, 22 irregularities and gaps in regulations have been pointed out by the vigilance body, prompting the government to swing into action.
 +
 +
The department of financial services has written to all staterun banks, asking them to analyse all accounts of over Rs 50 crore and initiate action after examining accountability of executives and lodge complaints with law enforcement agencies.
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While bankers acknowledged that there may be instances of improper transactions, they said the latest advisory is prompting many lenders to go slow on asset sales — which typically peak at the year-end. Some of the bankers said this may result in several loans, which would have been sold, remaining on their balance sheets.
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= Loans and Defaulters =
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==Wilful defaulters:38% rise, 2012- 2015==
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[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=No-of-wilful-defaulters-rises-38-in-three-04052016001014 ''The Times of India''], May 04 2016
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[[File: Banks with highest growth in default cases, 2012-15.jpg|Banks with highest growth in default cases, 2012-15; Graphic courtesy: [http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=No-of-wilful-defaulters-rises-38-in-three-04052016001014 ''The Times of India''], May 04 2016|frame|500px]]
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The number of wilful defaulters, who have not repaid their loans to public sector banks despite having the ability to do so, shot up by 38% to 7,686 at the end of December 2015, compared to 5,554 in December 2012, with lenders finally starting to issue the tag amid rising bad debt plaguing the Indian economy.
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 +
The amount involved in these cases has shot up 2.4 times to Rs 66,190 crore, compared to around Rs 27,750 crore three years ago, the government informed Parliament.
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Bankers, however, war ned that some of the banks may still have kept a few firms and their promoters out of the net. “Banks have not done a complete exercise to identify all wilful defaulters in line with RBI guidelines,“ said Deepak Narang, a former executive director of United Bank of India. No one certifies that all the wilful defaulters have been identified. There has been an increase in recent years but not all accounts have been identified,“ Narang said.
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He furnished the exam ples of Indian Overseas Bank and United Bank, where the numbers of such defaulters have come down. “How is that possible when the NPA in the system is rising and banks are reporting losses?“ RBI rules require banks to declare a borrower `wilful defaulter' if it has defaulted in repayment despite having the capacity to honour the obligation. Similarly , a defaulter who has diverted or siphoned off the funds, or has disposed off fixed assets or immovable property , can be given the tag.“The default to be categorised as wilful must be intentional, deliberate and calculated,“ the guidelines say .
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Under pressure from RBI to act against defaulters, banks have begun to crack the whip only in recent months.As a result, lenders such as PNB have seen a massive spurt in the number of wilful defaulters -from 71 to 904 in three years (see graphic). In value terms too, PNB tops the list in terms of the growth rate with the amount involved jumping from Rs 199 crore at the end of December 2012 to almost Rs 11,000 crore at the end of 2015. Indian Bank and Andhra Bank (over 7times each).
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SBI and its associates, which account for nearly a quarter of banking business, are at top of the pile in terms of amount involved but their share is around 28%, compared to 35% at the Dec-end of 2012, indicating that nationalised banks have only now begun to take exercise seriously .
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==2017: wilful defaulters owe ₹1 lakh cr+ to banks==
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[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F02%2F23&entity=Ar00321&sk=F5736D1C&mode=text  Atul Thakur, India’s wilful defaulters owe more than ₹1 lakh cr to banks, February 23, 2018: ''The Times of India'']
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[[File: 2017- Indian banks’ 11 largest wilful defaulters; How the debt has grown, 2008-2017.jpg|2017: Indian banks’ 11 largest wilful defaulters <br/> How the debt has grown, 2008-2017 <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F02%2F23&entity=Ar00321&sk=F5736D1C&mode=text  Atul Thakur, India’s wilful defaulters owe more than ₹1 lakh cr to banks, February 23, 2018: ''The Times of India'']|frame|500px]]
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As on September 30, 2017, more than Rs 1 lakh crore was owed to banks by people or companies characterised as “wilful defaulters”, that is those who are unwilling to pay despite having the capacity to do so. TOI analysed more than 9,000 such accounts for which banks have filed lawsuits for recovery and found that the top 11 debtor groups, each with dues of over Rs 1,000 crore, together had over Rs 26,000 crore outstanding to the banks.
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Analysis of the publicly available data for suit-filed accounts (wilful defaulters) of Rs 25 lakh and above shows that Jatin Mehta-promoted Winsome Diamonds & Jewellery Ltd and Forever Precious Jewellery & Diamonds Ltd owed close to Rs 5,500 crore to various banks. Mehta is reported to be now a citizen of St Kitts and Nevis, a tax haven with which India doesn’t have an extradition treaty.
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Mehta’s companies are followed by Vijay Mallya’s Kingfisher Airlines, which has to pay back over Rs 3,000 crore under this head. The third in the list is REI Agro, a company owned by Sandip Jhunjhunwala, which, according to news reports, was once listed in London and Singapore stock exchanges and was co-sponsor of an IPL team. It owes Rs 2,730 crore.
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 +
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''Bad loans grew 4-fold to ₹1.1L cr during 2013-2017''
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Next in the list are the companies owned by Prabodh Kumar Tewari and his family members. The amount outstanding on Mahuaa Media, Pearl Studio Pvt Ltd, Century Communication and Pixion Media Pvt Ltd is Rs 2,416 crore.
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The other companies that owe more than Rs 2,000 crore and are unwilling to pay despite having the means, according to the banks, are Zoom Developers Pvt Ltd promoted by Vijay Choudhary, Reid & Taylor (India) Limited & S Kumars Nationwide Limited, both promoted by Nitin Kasliwal, and media baron T Venkatram Reddy’s Deccan Chronicle Holdings Limited.
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 +
The data shows the alarming rate at which these bad loans are growing. In the past one year it has increased by about 27%. In the previous three years, it had increased by 38%, 67% and 35%, respectively.
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 +
Thus, between September 2013 and September 2017, the amount has quadrupled from Rs 28,417 crore to over Rs 1.1 lakh crore. While some of this would be due to interest being added each year, the quantum of the increase is too large to be entirely or even mainly due to that.
 +
 +
The RBI defines “wilful default” as defaults done despite the borrowers’ paying capacity. Money diverted for purposes other than the specific purpose of finance, or siphoned off and hence not available as assets to the borrower also qualifies as wilful default. Borrowers who have sold fixed assets that they provided as collateral to secure the loan without informing the bank also come under this category.
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The cumulative total of more than 50 companies or groups each with over Rs 250 crore of wilful default works out to about Rs 48,000 crore. To put that in perspective, it is only slightly less than the government’s allocation of Rs 52,800 crore for health in the 2018-19 Budget.
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 +
Bank-wise analysis of data shows nationalised banks (excluding SBI and associates) constitute about 60% of this money. SBI and its associates account for one-fourth of the total. Private sector banks have also declared over Rs 14,000 crore as wilful defaults.
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== Defaults by gems, jewels companies, till 2017==
 +
[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F02%2F23&entity=Ar02402&sk=058227B1&mode=text  Chethan Kumar, PNB lost four times more money than SBI did to jewel thieves, February 23, 2018: ''The Times of India'']
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[[File: Defaults by gems, jewels companies, bank-wise, till 2017.jpg|Defaults by gems, jewels companies, bank-wise, till 2017 <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F02%2F23&entity=Ar02402&sk=058227B1&mode=text  Chethan Kumar, PNB lost four times more money than SBI did to jewel thieves, February 23, 2018: ''The Times of India'']|frame|500px]]
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Highly cash-dependent traders in gems and diamonds have cost banks at least Rs 5,000 crore through 90 defaults, bank-wise and company-wise data on wilful defaulters compiled by the Federation of Bank of India Staff Unions (FBISU) shows.
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 +
The top loser is PNB, with just nine defaulters but a loss of Rs 1,790 crore — four times the amount SBI lost.
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SBI reported the most number of wilful defaults(15) and lost Rs 410 crore (see table). PNB, incidentally, has lost the most among banks.
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 +
According to FBISU data, the total number of wilful defaulters is a little over 5,000, costing banks about Rs 49,000 crore, but the latest RBI data shows the numbers have jumped to 8,915 and Rs 92,376 crore, respectively. Of these wilful defaulters at the end of March 2017, PNB had the most (1,120), followed by SBI (997).
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At least two bankers TOI spoke to said the exposure to gems and jewel companies must have also increased multifold. “Given that this data doesn’t include the recent PNB scam, the final number could point to one of the worst frauds the sector has seen,” one of them said.
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 +
Small and big loans have remained unpaid, while companies like Winsome, Beautiful Diamonds and Auro Gold Jewellery have defaulted with multiple banks. In some cases, banks are in the process of recovery, while in others investigations are pending.
 +
 +
Among the various means used to exploit banks is changing the names of companies and borrowing.
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 +
Data shows that Beautiful Diamonds was earlier called Splendour Gems, while Auro Gold Jewellery Private Limited later dropped the word “Private” from its name. Another firm, Ghanshyandas Gems and Jewels, later became “Ghanshyamdas”.
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 +
“The diamond trade is highly cash-dependent and the source of major money laundering. It may be conceivable that diamond merchants resorted to higher borrowing through Nostro accounts overseas to deal with the setbacks caused by constriction of the cash economy,” Tobby Simon of Synergia Foundation, a multidisciplinary think tank, said.
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 +
Experts, while pointing out how the total recapitalisation amount PNB received was about Rs 5,473 crore, pushing the bank’s net worth to Rs 20,000 crore, said that assuming the best scenario of recovery (of the Rs 11,300 crore) is 50%, the fraud has wiped out the entire money taxpayers had coughed up to recapitalise the bank.
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 +
Among other banks that suffered are Union Bank of India with nine defaults and Oriental Bank of Commerce with eight defaults.
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 +
Professor Charan Singh, former RBI chair professor at IIM-B, while calling for a complete overhaul of the banking system, cautioned against politicising the issue. “There’s a need to consider the sentiments of the public. Overreaction in the public domain can only deter depositors from banking, and bankers from lending.”
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== 2018, March: The biggest defaulters==
 +
[[File: The biggest defaulters, as in March 2018.jpg|The biggest defaulters, as in March 2018 <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F03%2F26&entity=Ar01702&sk=906EE7D9&mode=text  Mayur Shetty, Banks face triple whammy: Nirav, NPAs & rising yields, March 26, 2018: ''The Times of India'']|frame|500px]]
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'''See graphic''':
 +
 +
''The biggest defaulters, as in March 2018''
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 +
==Riot defaulters exempt==
 +
[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Defaults-cant-bar-Guj-riot-hit-from-special-03052016009021 ''The Times of India''], May 03 2016
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 +
''' Defaults can't bar Guj riot-hit from special loans: HC '''
 +
 +
The Gujarat high court has held in a case that a bank cannot deny loan under special policy for 2002riot affected because the applicant had defaulted in payments earlier.
 +
The HC has asked the state government and Bank of India to extend loan to a 2002-riot affected trader from Bhavnagar, Usman Ghani Aadhiya, who had defaulted in an earlier loan from the same bank. The bank was refusing to pay him a fresh loan after riots on the ground of his earlier default.
 +
 +
Aadhiya had suffered damage of Rs 5.1lakh to his business in the riots and was thus entitled to a loan at 4% flat interest from a bank according to policy.The HC said it was not permissible for the bank to exclude him from extending the loan because he falls in the category of the riots affected.
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==Loan defaulters’ rights==
 +
[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Five-rights-loan-defaulters-should-know-of-18042016018021 ''The Times of India''], Apr 18 2016
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PREETI KULKARNI
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''' Five rights loan defaulters should know of '''
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If you have defaulted on loan repayment and the bank wants to repossess your assets, all is not lost
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If you have defaulted on a loan, the rules do not give the lender a complete walko ver. Keep the following points in mind if you find yourself in such a situation.
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''' Right to ample notice '''
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A default does not strip you of your rights.Banks have to follow process and give you time to repay dues before repossessing your assets to realise the arrears. Typically, banks initiate such proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Secu-rity Interests (Sarfaesi) Act. If the borrower's account is classified as a non-performing asset, where repayment is overdue by 90 days, the lender has to first issue a 60-day notice.
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“If the borrower fails to repay within the notice period, the bank can go ahead with sale of assets. However, in order to sell, the bank has to serve another 30-day public notice mentioning the details of the sale,“ says banking and management consultant V.N.Kulkarni.
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''' Right to ensure fair value '''
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The lender starts the process of auctioning your property to recover dues if you fail to clear what you owe or respond during the 60-day notice period. However, before doing so, they will have to issue another notice specifying the fair value of the secured asset as assessed by the banks' valuers, along with details like reserve price, date and time of auction. “The borrower can object if the property is undervalued. He can justify his objection by conveying any better offer that he may have so that the bank can make a decision,“ says Kulkarni. In other words, you can look for prospective buyers on your own and introduce them to the lender if you think that the property can yield a better price.
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''' Realise balance proceeds '''
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Do not write off your asset mentally the moment it is repossessed. Keep track of the auc tion process. Lenders are required to refund any balance after recovering the dues, which s a real possibility given that property pric es can shoot up beyond the owed amount After recovering the dues and expenses of conducting the auction, the bank has to re und the remaining amount to the borrower as the money belongs to him,“ says Kulkarni
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''' Right to be heard '''
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During the notice period, you can make your representation to the authorised officer and put forth your objections to the repossession notice. “The officer has to reply within seven days, giving valid reasons if he rejects the representation and objections raised by the borrower,“ says Kulkarni.
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== Frauds below Rs 1L not to be reported to police: CVC==
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[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Dont-report-frauds-below-Rs-1L-to-police-17062017011005  Don't report frauds below Rs 1L to police, CVC asks banks, The Times of India], Jun 17 2017
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The Central Vigilance Commission (CVC) has asked public sector banks not to report frauds below Rs one lakh to local police, unless their staff is involved in such crimes. Earlier banks were mandated to report fraud of above Rs 10,000 and below Rs 1 lakh to police.
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The decision was taken by the CVC in consultation with the Reserve Bank of India (RBI), taking into account the practical difficulties faced by public sector banks in reporting such categories of cases.
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It has been decided that only if staff of the bank is involved in the fraud cases of below Rs 1 lakh and above Rs 10,000, would such cases need to be reported or complaint filed with local police station by the bank branch concerned, the commission said in a directive to chiefs of all the banks.
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The cases of frauds of upto Rs one lakh and not below Rs 10,000 are to be scrutinised by banks officials concerned for further necessary action, a senior CVC official said.
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As of September 30, 2016, the Non-Performing Assets (NPAs) declared by various scheduled commercial banks stood at a whopping Rs 6,65,864 crore, according to an official data. The NPAs of the country's largest lender State Bank of India is Rs 97,356 crore, followed by Rs 54,640 crore of Punjab National Bank and Rs 44,040 crore of Bank of India, it said. Bank of Baroda has NPAs of Rs 35,467 crore, Canara Bank Rs 31,466 crore, Indian Overseas Bank Rs 31,073 crore, Union Bank of India Rs 27,891crore.
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=Loans: recovery of =
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== 'Lender can't seize vehicle without prior notice'==
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[https://timesofindia.indiatimes.com/business/lender-cant-seize-vehicle-without-prior-notice/articleshow/63662087.cms  Dipak K Dash, 'Lender can't seize vehicle without prior notice', April 8, 2018: ''The Times of India'']
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A finance company cannot forcibly take possession of a vehicle for non-payment of dues without sending a notice to the borrower, country's apex consumer commission has said.
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The National Consumer Disputes Redressal Commission (NCRDC) on Friday ordered a private finance company to pay Rs 80,000 to the borrower whose tractor was seized by the company in January, 2011 for alleged non-payment of dues.
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Directing Shriram Transport Finance Company to refund the amount, which the borrower had paid to the company, with 9% interest within four weeks, single-member bench of M Sreesha said, "In my opinion, a seizure of the vehicle in such circumstances violating the principles of natural justice without giving an opportunity to the borrower to show his bona fides, amounts not only to unfair trade practice but also deficiency of service for which the financier is liable to compensate the complainant."
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The NCDRC relied on the "vehicle repossession notice" by the company to the borrower, which showed that the notice was issued 10 days after the actual date of repossession of the tractor and the Commission observed that this "cannot be stated to be a notice prior to repossession which is in contravention of the principle of natural justice".
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The case dates back to December 2009 when one Sakharam Sahu of Durg in Chhattisgarh had purchased the tractor with Rs 1 lakh loan after mortgaging his vehicle. Sahu needed to pay Rs 4,677 monthly instalment for 31 months. The finance company took possession of the vehicle on January 15 in 2011 as the borrower did not pay the instalment "despite repeated demands". The company had raised a demand of Rs 1.30 lakh. Sahu had submitted that he had repaid Rs 80,000 out of the total Rs 1 lakh loan and hence the company demanding Rs 1.30 lakh was "unjustified". The finance company took possession of the vehicle in January, 2011.
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Aggrieved by the action, Sahu approached the district consumer forum, but did not get any relief. Though he later challenged the order in the state commission, it upheld the district forum's order. Finally, he challenged the state commission order in the NCDRC in 2014.
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The NCDRC observed, "It is relevant to note that the notice is admittedly dated 25.01.2011, whereas in the body of the letter it is stated that the vehicle was taken into possession on 15.01.2011 at 2 pm. Viewed from any angle this repossession notice which dated 10 days after the actual date of repossession cannot be stated to be a notice prior to repossession which is in contravention to the principles of natural justice."
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==2018: RBI issues circular to treat defaulters as insolvent==
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[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F04%2F03&entity=Ar02314&sk=F74C5B21&mode=text  April 3, 2019: ''The Times of India'']
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[[File: How the story unfolded- February 12, 2019 circular by the RBI.jpg|How the story unfolded- February 12, 2019 circular (to treat defaulters as insolvent) by the RBI <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F04%2F03&entity=Ar02304&sk=E8FE2ADE&mode=text  April 3, 2019: ''The Times of India'']|frame|500px]]
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The Feb 12 circular placed the RBI in a lonely corner — business houses were up in arms, banks were upset at having to make large-scale provisions and the govt was unhappy because several under-construction power projects faced the prospect of liquidation
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'''WHAT IS THE CIRCULAR ABOUT?'''
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On February 12, 2018, the RBI wrote to banks asking them to classify as a defaulter any company that fails to meet the payment deadline even by a day. The circular also forced banks to drag these companies to bankruptcy court if the defaults were not resolved in 180 days. The circular did away with various loan-restructuring schemes that aimed to give stressed borrowers more time to repay.
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'''WHY WAS IT ISSUED?'''
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The circular was issued after the Insolvency and Bankruptcy Code (IBC) came into force. Until the IBC laws were enacted, defaulters had the upper hand as banks could avoid making provisions towards non-performing assets (NPAs) by giving them more time and restructuring the loan. However, experience showed that restructuring only delayed and worsened the problem and the dues of these companies snowballed because of restructuring and all of them defaulted.
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The RBI’s objective was to get banks to clean up their books by selling defaulting companies and not postponing the problem through restructuring.
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'''WHAT’S THE IMPACT?'''
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The circular resulted in banks classifying a larger chunk of their loans as NPAs. The first quarter of FY19 saw 21 PSU banks reporting a loss of Rs 16,600 crore as against a loss of Rs 307 crore a year earlier. Losses continued to rise for the second and third quarters. For public sector banks, gross NPAs hit 10.9% as of December 2018.
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Most of the loans that were restructured in the earlier years turned into NPAs.
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'''WHO OPPOSED IT?'''
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The lead in the legal battle against this directive was taken by an association of power producers, representing projects with loans of over Rs 1.73 lakh crore. Of this, Rs 34,000 crore of defaults were because government departments did not make payments in time or due to policy changes. Later, other industries too became part of the suit with the RBI fighting a lone battle on the other side.
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'''WHY DID THE SC STRIKE IT DOWN?'''
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The apex court observed that the RBI had the power to give directives to banks to proceed against companies in the event of a default but cannot give directions in respect of debtors generally. While the argument was confined to RBI’s power to direct banks to initiate insolvency proceeding against debtors in general, the final order struck down the entire circular as ‘ultra vires’ (beyond one’s authority).
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===2019/ SC quashes the RBI circular===
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[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F04%2F03&entity=Ar00300&sk=1ED54266&mode=text  Amit Anand Choudhary & Dhananjay Mahapatra, SC quashes stringent RBI circular against defaulters, April 3, 2019: ''The Times of India'']
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[[File: Impact of SC’s 2019 order quashing RBI’s 2018 circular to treat defaulters as insolvent.jpg|Impact of SC’s 2019 order quashing RBI’s 2018 circular to treat defaulters as insolvent <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F04%2F03&entity=Ar00300&sk=1ED54266&mode=text  Amit Anand Choudhary & Dhananjay Mahapatra, SC quashes stringent RBI circular against defaulters, April 3, 2019: ''The Times of India'']|frame|500px]]
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[[File: No Supreme Court relief likely for these 40 companies..jpg|No Supreme Court relief likely for these 40 companies. <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F04%2F03&entity=Ar00300&sk=1ED54266&mode=text  Amit Anand Choudhary & Dhananjay Mahapatra, SC quashes stringent RBI circular against defaulters, April 3, 2019: ''The Times of India'']|frame|500px]]
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''Debt-Laden Power Sector To Benefit Most''
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In a big setback to efforts for recovery of bad debts of companies owing Rs 2,000 crore or more to banks, the Supreme Court on Tuesday quashed the RBI’s February 12, 2018, circular, which directed banks to move against defaulters under the Insolvency and Bankruptcy Code (IBC) on their failure to pay up within 180 days from March 1, 2018.
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A bench comprising Justices R F Nariman and Vineet Saran also quashed all IBC proceedings initiated by banks under the RBI circular against defaulters.
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Thus, the apex court turned the clock back to March 1, 2018, giving a huge relief to defaulters who owe Rs 2,000 crore or more to banks.
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“All actions taken under the said circular, including action by which the Insolvency Code has been triggered, must fall along with the said circular,” it said.
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However, this ruling will not affect initiation of IBC proceedings by banks against big defaulters taken before, or independent of, the RBI circular.
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One such example is the IBC proceedings launched by a State Bank of India-led consortium against Essar Steel, which on culmination of proceedings is set to be taken over by Arcelor Mittal. Essar Steel had a debt of Rs 45,000 crore.
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Writing the 84-page judgment, Justice Nariman accepted the main plea of senior advocate A M Singhvi, who appeared for the Association of Power Producers and argued that peculiarity of stress factors in each sector would not permit the RBI to bracket defaulting companies in different sectors for proceeding under IBC.
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Singhvi’s arguments were adopted by other counsel who appeared for defaulting companies operating in varied sectors including telecom, steel, infrastructure, sports infrastructure, sugar, fertilisers and shipyards.
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'''SC: Circular illegal due to lack of Central authorisation'''
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Although the SC accepted senior advocate Rakesh Dwivedi’s arguments and upheld the constitutional validity of Section 35AA of the Banking Regulation Act, which empowers the Centre to exercise the power itself or authorise the RBI to direct banks to proceed against specific defaulters, it found the February 12 circular to be illegal as there was no such authorisation from the Centre to RBI to direct banks to proceed against defaulters by specifying a default limit and a 180-day period.
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“The Banking Regulation Act specifies that the central government is either to exercise powers along with the RBI or by itself. The role assigned by Section 35AA, when it comes to initiating the insolvency resolution process under the Insolvency Code, is thus, important. Without authorisation of the central government, obviously, no such directions can be issued,” the bench said.
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Referring to Section 35AA, the bench said, “It is clear that directions that can be issued by the RBI (to banks) under Section 35AA (with authorisation from Centre) can only be in respect of specific defaulters by specific debtors. This is also the understanding of the central government when it issued the notification on May 5, 2017, which authorised the RBI to issue such directions only in respect of ‘a default’ under the Code. Thus, any direction in respect of debtors generally, would be ultra vires (in violation of) Section 35AA.”
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Justices Nariman and Saran also said the RBI circular “applies to banking and nonbanking institutions alike, as banking and non-banking institutions are often in a joint lenders’ forum which jointly lend sums of money to debtors. Such non-banking financial institutions are, therefore, inseparable from banking institutions insofar as the application of the RBI circular is concerned”.
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Having clarified this, the bench said proceedings initiated by both banking and nonbanking financial institutions under the circular would have to be quashed along with the circular.
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==2018: PNB gets vigilance prize, Govt explains why ==
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[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F03%2F09&entity=Ar01308&sk=9610465C&mode=text  Govt explains why PNB got vigilance prize, March 9, 2018: ''The Times of India'']
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The government informed the Rajya Sabha that the Central Vigilance Commission (CVC) had conferred the ‘vigilance excellence award’ to chief vigilance officer (CVO) of Punjab National Bank (PNB) purely for best disposal rate of cases relating to disciplinary proceedings initiated in 2016.
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Replying to a question, minister of state for personnel Jitendra Singh said the awards were conferred in 2017 for the first time under various categories to chief vigilance officers (CVOs), vigilance functionaries and management of six public sector banks for work done in 2016.
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For the award in the category ‘timely completion of disciplinary proceedings’, Singh told the Elders, CVO of Punjab National Bank had the best disposal rate (92%) of vigilance complaints, among four eligible entries.
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Disciplinary proceedings were finalised in 187 cases out of a total of 203 cases within the prescribed timeline of six months for major penalty and three months of minor penalty, he added. The vigilance award had raised eyebrows as it came in the wake of outbreak of the PNB scam involving jewellers Nirav Modi and Mehul Choksi.
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=Loans: Education loans=
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== Education loan specialists grow faster==
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[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Edu-loans-attract-specialist-lenders-12072017009020 Mayur Shetty|Edu loans attract specialist lenders|Jul 12 2017: The Times of India (Delhi)]
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Edu loans attract specialist lenders
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Mumbai
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Pvt Players Positive On Growing Biz
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Education loans advanced by banks have grown by a measly 2.7% in FY17--half as much as the average growth rate of all loans.But that's only half the story .Specialist lenders are growing rapidly and private players are looking at this segment.
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Education loan specialists like HDFC Credila and Avanse have seen growth rates ranging from 40% to 70% in disbursements even as new age lenders like InCred Finance are eyeing the sector. Ajay Bohora, co-founder and CEO of HDFC Credila, says it's clear there is great demand. The shift in government focus to primary schooling has resulted in private in stitutions filling the gap in tertiary education. Secondly , in India and globally , cost of attendance (fees and other expenses) for tertiary education has been rising faster than inflation which is taking it out of reach of the middle class. HDFC Credila has disbursed Rs 1,300 crore of loans in FY17, which is slightly lower than the Rs 1,800 crore increase in the education loan portfolio of banks.
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Bankers say they have pulled back from education loans because bad loans are high(7-8%). This is particularly true for the sub-Rs 4 lakh category where banks do not demand any security.
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According to a senior PSU bank official, the reasons for the defaults are two-fold. One, engineering and management institutions have mushroomed but the quality of education has not been up to the mark. Two, many students relocate after graduation and their loans turn into NPAs.
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“A lot of education loans are probably camouflaged as personal loans or loans against property ,“ said Prashant Bhonsle who heads the education loan vertical at InCred Finance. According to Bhonsle, students are rushed for time and at many banks it is faster to get a personal loan or a loan against property .The downside is that the interest paid cannot be claimed as deduction under Section 80E of the I-T Act. Also, repayment of such loans begins immediately , unlike education loans where there is a repay ment holiday . Also, education loans have tenures ranging from one to 12 years depending on course duration.
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According to Rajnish Kumar, MD, State Bank of India, the outlook for education loans has improved with the government introducing a credit guarantee scheme for borrowings up to Rs 7.5 lakh in 2015. “The recovery problems that we faced in the south are now behind us and we will be growing the portfolio,“ said Kumar.
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The ground reality is that unsecured education loans are a viable business only in segments where employment is certain. As a result, only those who qualify for top management or engineering institutes can expect to cover fees through bank financing without collateral. For others, a loan above Rs 7 lakh would invariably require property as collateral from parents.
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[[File:loans.PNG |Growth of education loans and bank credit, 2008-17.|frame|500px]]
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Private lenders are positive as they have the skills and they can be selective.“Appraising a loan application is not easy because there are over 700 universities in India--some, like the University of Pune, have over 600 affiliated colleges, with each having 20-30 courses--and for credit assessment it's important to know the employment opportunities for each course,“ said Bohora.
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It is not just finance companies, even lenders like Axis Bank, which was earlier a small player in education loans, has now created a new vertical for this product and is planning to grow. “We have grown 100%, although on a small base, and we see potential in this business,“ said Rajiv Anand, head of retail at Axis Bank. However, the bank is focusing on higher education in premier institutions like IIMs where both employment opportunities and fees are high. “The advantage for us is that we have good banking relationships with several trusts and educational institutions which makes it easier to partner with them for education loans,“ said Anand.
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==2017: Defaults highest in govt designed education loans==
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[http://timesofindia.indiatimes.com/business/india-business/defaults-highest-in-govt-designed-education-loans/articleshow/60284798.cms  Mayur Shetty, Defaults highest in govt-designed education loans, Aug 30, 2017: The Times of India]
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The government-designed education loan scheme, which accounted for half of all education loans five years ago, now amounts to only a fifth. The scheme provides for loans up to Rs 4 lakh without collateral.
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Banks are withdrawing from this segment, which is seeing the highest level of defaults. A study by TransUnion Cibil shows that defaults in education loans are lowest (below 1%) on big ticket loans of over Rs 15 lakh, which are typically taken for post-graduate MBA programmes in reputed institutes.
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TOI had earlier reported how lenders were shifting focus on high-value loans as defaults in the sub-Rs 4 lakh category rose. The reasons cited by banks are now borne out by the data released by Cibil, which shows that the industry has experienced a default ratio of 8.1% on loans below Rs 4 lakh. Incidentally, most of these smaller-ticket education loans were disbursed by public sector banks.
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According to Harshala Chandorkar, chief operating officer of TransUnion CIBIL the pattern of defaults raises the question whether the market is lagging in creating new job opportunities for those graduating from category II and III academic institutions.
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"While delinquencies may be still better than the overall ratio of non-performing assets of many banks, the defaults are much higher than in other personal loan segments whether it is home loans, consumer durable loans, or even credit card outstanding," she said. Incidentally, the defaults that are now being experienced by banks are in respect of defaults witnessed on loans disbursed a few years earlier as education loans contain a moratorium, giving them time until they start earning to repay the loan.
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TransUnion CIBIL research also indicate that since 2012, the number of new education loans disbursed annually has been showing flat to negative growth.
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The overall amount of loans disbursed has been showing a steady positive growth. This growth is driven by a marked shift towards loans of ticket size over Rs 15 lakh, which currently amount to over half the loan amount disbursed.
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==2015>’17: Defaults increase 47% on weak job market==
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[http://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2017%2F12%2F23&entity=Ar00507&sk=EA055F03&mode=text  Education loan defaults soar 47% on weak job mkt, December 23, 2017: ''The Times of India'']
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[[File: Non- Performing Assets, 2015 to 2017, year-wise.jpg|Non- Performing Assets, 2015 to 2017, year-wise <br/> From: [http://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2017%2F12%2F23&entity=Ar00507&sk=EA055F03&mode=text  Education loan defaults soar 47% on weak job mkt, December 23, 2017: ''The Times of India'']|frame|500px]]
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A weak job market and wilful default by even those in well-paying jobs have hit the education loan portfolio of state-run banks with non-performing assets soaring by almost 47% between March 2015 and last March, data shared in Parliament showed.
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The finance ministry told the Lok Sabha that NPAs, or bad debt, went up from Rs 3,536 crore at the end of March 2015 to Rs 5,192 crore on March 31, 2017. The surge took place in 2015-16, with the pace slowing down during the last financial year. The problem is so acute for at least five lenders that the stock of bad loans has more than doubled, with UCO Bank and Indian Bank leading the pack. At the same time, the increase in loan flow has also been less than 10% during this two-year period.
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‘Absence of guarantees makes it easy to default’
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But what is even worse is that there was only 3.4% riseduring 2016-17, on the back of a 5.6% growth in the previous year, indicating that either demand was tepid or banks were reluctant to lend. Bankers, however, said that they had not gone slow on education loans.
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They said that defaults were rising as several students had not found good jobs, especially when it came to those who pursuedMBAsor engineering degrees.
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However, there are cases where even students from good colleges who were employed by leading companies are refusing to pay.
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For instance, an engineer with a global technology giant stop repaying theloan and was tracked down through social media. When confronted, he cleared the dues, said a bank executive. “The problem isthe absence of security and guarantees, which makes it easy todefault,” he added.
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The government toldParliament that to reduce the incidence of NPA in education loans, the IBA Model Education Loan Scheme has been modified to factor in the the needs of students. The changesinclude a repayment holiday or a moratorium of course period plus one year, additional moratorium to account for spells of under-employment or unemployment, and extension of the repayment period to 15 years to reduce the equated monthly instalment.
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The Centre has also launched a CreditGuaranteeFund Scheme for Education Loans (CGFEL) for loans upto Rs 7.5 lakh to provide guarantee up to75% of thedefault amount.
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==2014-19: Education loans shrink 25%==
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[https://epaper.timesgroup.com/olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F05%2F25&entity=Ar00508&sk=29585C9C&mode=text  Rachel Chitra, May 25, 2019: ''The Times of India'']
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[https://epaper.timesgroup.com/olive/apa/timesofindia/SharedView.Article.aspx?href=TOIDEL%2F2019%2F05%2F25&id=Ar01819&sk=E34090BA&viewMode=text  Rachel Chitra, May 25, 2019: ''The Times of India'']
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[[File: Number of students getting loans (in lakh)- March 2015-19; Average size for new loans disbursed during the year, March 2015-19; Amount disbursed, 2015-19; NPA (% of loan advances), March 2015-19.jpg|Number of students getting loans (in lakh)- March 2015-19; <br/> Average size for new loans disbursed during the year, March 2015-19; <br/> Amount disbursed, 2015-19; <br/> NPA (% of loan advances), March 2015-19; <br/> From: [https://epaper.timesgroup.com/olive/apa/timesofindia/SharedView.Article.aspx?href=TOIDEL%2F2019%2F05%2F25&id=Ar01819&sk=E34090BA&viewMode=text  Rachel Chitra, May 25, 2019: ''The Times of India'']|frame|500px]]
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[[File: 2014-19- Education loans shrank 25%.jpg|2014-19- Education loans shrank 25% <br/> From: [https://epaper.timesgroup.com/olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F05%2F25&entity=Ar00508&sk=29585C9C&mode=text  Rachel Chitra, May 25, 2019: ''The Times of India'']|frame|500px]]
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The number of education loans disbursed in India has shrunk by as much as 25% in the past four years. The number of students able to secure loans fell to 2.5 lakh as of March 31, 2019 from 3.34 lakh students as of March 31, 2015.
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High non-performing assets levels, which have nearly doubled to 12.5% in the past four years, is the main reason for the decline.
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The number of active loan accounts also fell during this period. However, the total loan amount disbursed has grown 34% to Rs 22,550 crore in FY19 from Rs 16,800 crore in FY16, indicating that banks are keen only on funding higher-sized loans.
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While the total number of active education loan accounts in India fell from 34 lakh to 27.8 lakh in the past four years, the value of an average loan increased from Rs 5.3 lakh to Rs 9 lakh during the same period.
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“Banks are looking at a value game. They are no longer interested in volumes,” said Parijat Garg, SVP, credit bureau CRIF Highmark.
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Banks, other than PSUs, have largely downed shutters for students seeking loans below Rs 4 lakh without collateral. “Banks have gradually shifted from lending to poorer students or those they consider a risk in their ability to land a job or parents unable to put
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up collateral. Most private banks have a tie-up with elite educational institutions and they lend only to their students. Public sector banks have red tape, documentation and formalities before they give Rs 4 lakh loans without collateral. It’s a dismal scene for less-privileged students,” says the CEO of a private bank.
 +
 +
Banks said they continue to lend, but not at the earlier pace. “We meet our prioritysector lending targets, which include education loans. But the rate of defaults makes us pause — we’re using data analytics and forensics for prudent lending,” says Mrutyunjay Mahapatra, MD, Syndicate Bank.
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 +
Since most banks are public-listed entities, they say they’re answerable to shareholders and have to curtail their losses. At Corporation Bank, NPA levels in 2018 are about 11% (Rs 177 crore in NPA of Rs 1,640 crore education loan disbursed). In terms of students lent to, the default rate is higher at 17.5%. Of 50,144 students who took loans, 8,777 defaulted.
 +
 +
The NPA levels were 8% for Corporation Bank five years ago, and the steady increase in defaults makes it more difficult to justify lending. “We’re facing the highest defaults in the sub-Rs 4 lakh segment. Higher-ticket size loans of between Rs 7-10 lakh normally have a lower rate of default,” said V Bharathi, MD, Corporation Bank.
 +
 +
RBI data of 2018 shows more than 91% of education loans being given to students are by public-sector entities. Analysts say there’s good reason for less participation from private banks. “The default rate in education loans is the highest in the retail segment; home loan default rates are between 0.5-1%, for two-wheelers around 2-3% and for commercial vehicle loans 3-4%. The risk-reward for bank being small ticket-size loans and prone to default doesn’t justify expansion in this segment,” says Alpesh Mehta, banking analyst, Motilal Oswal. Bankers blame the economic downturn, poor job market and excessive privatisation of education for this situation.
 +
 +
“There are hundreds of private colleges, engineering and arts churning out masses of students with mediocre or average skills in a tough job market. It is a supply-demand mismatch in the education job market. I don’t see the situation easing when it comes to education loans,” says N Kamakodi, CEO, City Union Bank.
 +
 +
==2018: 9% PSB loans turned bad==
 +
[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F01%2F05&entity=Ar02222&sk=4E5CF01E&mode=text  9% PSB edu loans turned bad in FY18, January 5, 2019: ''The Times of India'']
 +
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Nearly 9% of the education loans extended by public sector banks were categorised as NPAs in the last financial year, according to the government.
 +
 +
“According to information provided by the Indian Banks’ Association (IBA), NPAs of PSBs increased from 7.2% as on March 31, 2016 to 8.9% as on March 31, 2018,” minister of state for finance Shiv Pratap Shukla said in a written reply to the Lok Sabha. He was replying to a question whether NPAs in education sector rose to 9% during the two years period (2016-18). As of March 31, 2015, the bad loans in the education sector stood at 5.7%, the minister said.
 +
 +
=Loans: Home Loans=
 +
==Home loan closure checklist==
 +
[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=SMART-THINGS-TO-KNOW-18042016018023 ''The Times of India''], Apr 18 2016
 +
 +
''' Home loan closure checklist '''
 +
 +
1 Refer to the `list of documents to submit' when making the application for a loan, and make sure that all the original documents are recovered.
 +
 +
2 Ensure that the documents are complete and received in good condition, in the pre sense of a bank official, before signing the acknowledgement.
 +
 +
3 Take an NOC from the lender, specifying the address of the property against which the loan was taken, name of the borrower and the loan account number.
 +
 +
4 Request the lender to inform CIBIL re garding the closure of the loan account.
 +
 +
The process should take about 30 days from the date of loan closure.
 +
 +
5 Ensure that any lien is removed after the clo sure of the loan. An existing lien will create problems during the sale of the property.
 +
 +
==Home loan growth slows, affordable segment rises==
 +
[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Home-loan-growth-slows-but-affordable-segment-bright-21062017028039 Prabhakar Sinha,`Home loan growth slows, but affordable segment bright spot', Jun 21 2017: The Times of India]
 +
 +
[[File: Home loan and growth in banking credit, March 2015-March 2017.jpg|Home loan and growth in banking credit, March 2015-March 2017; [http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Home-loan-growth-slows-but-affordable-segment-bright-21062017028039 Prabhakar Sinha,`Home loan growth slows, but affordable segment bright spot', Jun 21 2017: The Times of India]|frame|500px]]
 +
 +
Even as housing credit growth moderated to 16% in 2016-17 as against 19% in 2015-16, the affordable housing segment holds promise, according to rating agency ICRA report.
 +
 +
The report said that lowering of interest rates and various government initiatives -Prime Minister Awas Yojana (PMAY), according infrastructure status, to boost affordable housing will increase the demand for the segment, which may see credit growth of up to 30%. As against an overall growth of 16% in the housing loan sector, total disbursal of credit in the affordable segment grew at 28% to Rs 1.2 lakh crore in 2016-17.
 +
 +
Despite moderation, the 16% credit growth in housing loan sector is still a bright spot in the economy if one sees it in the backdrop of growth in the non-food credit of entire banking sector which is languishing at 8.7% in 2016-17 as against 10.9% in 2015-16.
 +
 +
“While the slowdown was across both HFCs and banks, the decline in the pace of growth of banks was higher ­ declining from 19% in 2015-16 to 16% in 2016-17 -largely because they were operationally tied up in second half of 2016-17 on account of demonetization,“ according to the report. Housing finance companies' (HFCs) loan portfolio also dipped to 18% in 2016-17 from 19% in the previous year.
 +
 +
==2014>18: Self-employed segment grows; so do their defaults==
 +
[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F04%2F09&entity=Ar01707&sk=5D851596&mode=text  April 9, 2018: ''The Times of India'']
 +
 +
[[File: The home Loan Mix, 2014-18.jpg|The home Loan Mix, 2014>18 <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F04%2F09&entity=Ar01707&sk=5D851596&mode=text  April 9, 2018: ''The Times of India'']|frame|500px]]
 +
 +
''Segment Accounts For 30%, But NPAs Hit 1.1% Of Industry''
 +
 +
A subdued loan demand from businesses is increasing competition in home loans, leading to a rise in the number of self-employed individuals getting mortgages. Home loans to self-employed accounted for 30% of mortgages in fiscal 2017-18 as against 20% earlier. But the flip side is that delinquencies are also rising.
 +
 +
Gross non-performing assets (NPAs) in the segment are estimated to have inched up by 40 basis points (100bps = 1 percentage point) to around 1.1% by the end of fiscal 2018, compared with about 0.7% a few years back. According to a report by ratings agency Crisil, home loans to the self-employed segment have been growing at a compounded annual growth rate of 33% in the past four years compared to overall 20% expansion in housing finance. Outstanding home loans in this segment are expected to have topped Rs 2 lakh crore by the end of fiscal 2018.
 +
 +
What has been driving growth is the entry of a host of new housing finance companies (HFCs), which have been growing aggressively in this segment. Also, larger HFCs are pushing into the self-employed segment as banks ratchet up presence in retail following weak credit demand from corporates and asset quality pressures, Crisil said in the report.
 +
 +
Crisil Ratings senior director Krishnan Sitaraman said, “Several initiatives of both the government and the regulator in the recent past have led to fast growth in home loans taken by the self-employed. We expect such mortgages to continue showing good growth because of the sharp focus of smaller HFCs and increasing interest of the larger ones.” Crisil Ratings director Rama Patel said, “The two-year lagged NPAs in the self-employed segment, at around 1.8%, is much higher compared with about 0.6% in the salaried segment, where the portfolio quality has remained largely stable over the years.”
 +
 +
==Jan 2018/ Home loans up to ₹2L witness highest NPAs==
 +
[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F01%2F12&entity=Ar02809&sk=57362FF5&mode=text  Allirajan M , Affordable housing: Loans up to ₹2L see highest NPAs, January 12, 2018: ''The Times of India'']
 +
 +
[[File: Non-Performing Assets, PSBs and HFCs, 2015-16, 2016-17, year-wise.jpg|Non-Performing Assets, PSBs and HFCs, 2015-16, 2016-17, year-wise <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F01%2F12&entity=Ar02809&sk=57362FF5&mode=text  Allirajan M , Affordable housing: Loans up to ₹2L see highest NPAs, January 12, 2018: ''The Times of India'']|frame|500px]]
 +
 +
With a sharp rise in loan disbursements and number of beneficiaries in the affordable housing segment, loans of up to ₹2 lakh has ended up with the highest level of non-performing assets (NPAs) in home loans. Public sector banks reported higher NPAs in the sub-Rs 2 lakh housing loans slab than housing finance companies in 2016-17 and 2015-16, according to an RBI report on ‘Affordable Housing’.
 +
 +
NPAs for housing loans of up to ₹2 lakh stood at a whopping 11.9% for PSBs during 2016-17. Housing finance companies also saw a sharp surge in housing loan NPAs in this slab. NPAs went up from 6.1% to 8.6% for the sub-₹2 lakh slab between 2015-16 and 2016-17. NPAs stood at 10.4% for this slab. The overall NPAs for housing loans stood at 1.5% and 0.6% respectively for PSBs and housing finance companies during 2016-17. The government’s recent thrust on affordable housing through policy measures that include incentive schemes, accordance of infrastructure tag, interest subsidy scheme under PMAY (Pradhan Mantri Awas Yojana) have resulted in sharp rise in new housing projects in the affordable segment for low income groups. New unit launches in the affordable housing segment registered a 10.1% y-o-y growth in 2016-17. Affordable housing was the only segment in the residential real estate sector that saw a double digit growth. New launches in the mid-range and high-end segments fell by 11.7% y-o-y and 26.7% respectively in 2016-17.
 +
 +
There has been a more than three-fold increase in the number of houses completed under PMAY between April-December 2017. Investments to the tune of ₹1.72 lakh have been made under PMAY projects for constructing nearly 32 lakh houses.
 +
 +
=Loans: Personal loans=
 +
==2018: Loans against property up 33%, defaults cross 3%==
 +
[https://timesofindia.indiatimes.com/business/india-business/loans-against-property-up-33-but-defaults-cross-3/articleshow/67169927.cms  Mayur Shetty, Loans against property up 33%, but defaults cross 3%, December 20, 2018: ''The Times of India'']
 +
 +
[[File: Fastest expanding credit segment, 2017-18.jpg|Fastest expanding credit segment, 2017-18 <br/> From: [https://timesofindia.indiatimes.com/business/india-business/loans-against-property-up-33-but-defaults-cross-3/articleshow/67169927.cms  Mayur Shetty, Loans against property up 33%, but defaults cross 3%, December 20, 2018: ''The Times of India'']|frame|500px]]
 +
 +
 +
Loans against property (LAP), which is the fastest growing segment in personal loans in calendar year (CY) 2018 across banks and finance companies, has also recorded the biggest increase in delinquencies, according to an analysis of borrower data by TransUnion (TU) Cibil.
 +
 +
Delinquencies are defined as loans with overdues of more than 90 days.
 +
 +
LAP, which constitutes 1.6 million total accounts, saw a more pronounced delinquency rate as compared to other businesses (see graphic). Defaults rose 73 basis points (100bps = 1 percentage point) year-over-year to 3.03% in the quarter ended September 2018.
 +
 +
“Lenders must judiciously monitor their risk-management processes. LAP has risen at a rapid rate. At the same time, delinquency rates for these loans have now crossed 3% for the first time in several years. Lenders must now determine if the rapid demand for these loans, which are an excellent generator of revenue, outweighs the recent delinquency increases,” said TU Cibil vicepresident (research & consulting) Yogendra Singh.
 +
 +
The TU Cibil report includes loan data from all lenders including banks, non-banking finance companies and housing finance companies. Nonbank lenders have been driving growth in the LAP business. “The difficulties faced by non-banks were October onward and fresh origination of loans would have slowed down in the October-December 2018 quarter,” said Singh.
 +
 +
Credit card accounts increased by nearly 32% to 3.69 crore by Q3CY18, while personal loan accounts rose 26% to 1.5 crore in the same period. Indian LAP borrowers held average balances of Rs 34.93 lakh in Q3CY18. Comparatively, the average personal loans size per borrower was Rs 2.52 lakh. In credit cards, the average balance per holder was Rs 46,000.
 +
 +
=Loans: Policy repo rate=
 +
==2014-17==
 +
[[File: Rate cuts, 2014-17.jpg|Rate cuts, 2014-17 <br/> Following the [August 2017] announcement, the policy repo rate -the rate at which RBI lends to banks -stands reduced to 6.0% from 6.25%, the lowest since November 2010. Consequently , the reverse repo rate -the rate at which RBI borrows from banks -stands adjusted to 5.75%<br/> From [http://epaperbeta.timesofindia.com/Gallery.aspx?id=03_08_2017_001_059_007&type=P&artUrl=Loans-set-to-be-cheaper-as-RBI-softens-03082017001059&eid=31808 '' The Times of India ''] |frame|500px]]
 +
 +
'''See graphic''':
 +
 +
''Rate cuts, 2014-17''
 +
 +
==2018: 25-basis-point increase to 6.25%==
 +
[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F06%2F07&entity=Ar00323&sk=EB454E3E&mode=text  1st rate hike in Modi govt’s 4 yrs could make home loans dearer, June 7, 2018: ''The Times of India'']
 +
 +
[[File: Changes in repo rates, Jan 2014- Jun 2018.jpg|Changes in repo rates, Jan 2014- Jun 2018 <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F06%2F07&entity=Ar00323&sk=EB454E3E&mode=text  1st rate hike in Modi govt’s 4 yrs could make home loans dearer, June 7, 2018: ''The Times of India'']|frame|500px]]
 +
 +
''Fear Of Inflation Drives RBI Move''
 +
 +
Prompted by inflation fears and emboldened by growth, Urjit Patel on Wednesday delivered his first rate hike since taking over as Reserve Bank of India governor in September 2016. It’s also a first during Narendra Modi’s four-year tenure as PM.
 +
 +
While economic growth makes every government happy, it dreads sharp price rises, especially ahead of elections. The Modi government will be praying for a good monsoon because it’ll help spur growth and check inflation.
 +
 +
All six members of the RBI’s monetary policy committee (MPC) voted in favour of a 25-basis-point (100bps=1 percentage point) hike in the policy rate, taking it to 6.25%. It could lead to another round of marginal increases in home loan rates in the coming months; all major banks have in the last one week raised lending rates by 10bps.
 +
 +
Wednesday’s hike follows five rate cuts during Raghuram Rajan’s time as governor – 4 of 25 bps each and one of 50 bps – and two, both of 25bps, by Patel, the last in August 2017.
 +
 +
 +
'''Eco activity has shown sustained revival, says RBI'''
 +
 +
RBI governor Urjit Patel has maintained the RBI’s stance at neutral, which means that the central bank could go either way in the next policy in August.
 +
 +
Patel said RBI's decision was driven by its inflationtargeting mandate. The last rate hike – for 50 bps, to 8% – was by Rajan in January 2014.
 +
 +
In its statement, the RBI said that domestic economic activity has exhibited sustained revival in recent quarters and the output gap has almost closed. “Investment activity, in particular, is recovering well and could receive a further boost from swift resolution of distressed sectors of the economy under the Insolvency and Bankruptcy Code,” it added.
 +
 +
What has tempered the positive sentiment created by sharper growth – the Central Statistical Organisation last week announced a healthy 7.7% economic expansion for January-March – is the spectre of inflation. Data released since RBI’s April policy showed inflation jumped to 4.58% in that month from 4.28% in March. It is showing signs of firming up further with crude oil prices rising more than 10%. The rupee has also come under pressure with the US dollar gaining against most emerging market currencies.
 +
 +
According to Bank of India MD & CEO Dinabandhu Mohapatra, the fact that the RBI has revised its consumer price inflation forecast upward to 4.8-4.9% for the first half of FY19 shows that it will keep a hawk eye on retail prices in the months ahead. While a rate hike will lower the value of banks’ bond portfolios, the RBI has provided lenders some relief by allowing them to spread losses over four quarters. Also, medium and small enterprises have been given some relief in loan repayment. And the RBI’s decision recognizing banks' government bond holdings for meeting liquidity coverage norms will leave banks with more funds for lending, which is expected to keep rates under check.
 +
 +
The RBI’s rate hike may have surprised some analysts, but the growth forecast of 7.5% for FY19 boosted market sentiment with the sensex closing 276 points higher. Yes Bank MD & CEO Rana Kapoor said, “While the rate action is primarily in response to global uncertainty, especially from crude oil prices, it also signifies that the central bank is comfortable on the improving growth outlook.”
 +
 +
CARE’s chief economist Madan Sabnavis said, “The upside risk to the inflation emanates from the rising crude oil prices globally along with minimum support price impact.” He said the pace of inflation would depend on the progress and spread of monsoon.
 +
 +
“We expect one more interest rate hike by at least 25bps during the calendar year 2018, whereas we cannot rule out the possibility of two rate hikes by the end of the financial year 2018-19,” said Sabnavis.
 +
 +
“Investment activity, in particular, is recovering well and could receive a further boost from swift resolution of distressed sectors of the economy under the Insolvency and Bankruptcy Code,” RBI said in its statement
 +
 +
==2018, Jan-Sept, vis-à-vis US Fed, BoE==
 +
[[File: 2018, January-April- RBI’s key policy rates,  vis-à-vis those set by the US Fed and BoE.jpg|2018, January-April: RBI’s key policy rates,  vis-à-vis those set by the US Fed and BoE <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F10%2F06&entity=Ar02709&sk=432C1295&mode=image  October 6, 2018: ''The Times of India'']|frame|500px]]
 +
 +
[[File: 2018, May-September- RBI’s key policy rates,  vis-à-vis those set by the US Fed and BoE.jpg|2018, May-September: RBI’s key policy rates,  vis-à-vis those set by the US Fed and BoE <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2018%2F10%2F06&entity=Ar02709&sk=432C1295&mode=image  October 6, 2018: ''The Times of India'']|frame|500px]]
 +
 +
'''See graphics''':
 +
 +
''2018, January-April: RBI’s key policy rates,  vis-à-vis those set by the US Fed and BoE''
 +
 +
''2018, May-September- RBI’s key policy rates,  vis-à-vis those set by the US Fed and BoE''
 +
 +
==2017 Aug- 2019 Feb==
 +
[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F02%2F08&entity=Ar00503&sk=4B1D17DE&mode=text  Mayur Shetty, Das debuts as RBI guv with surprise rate cut, February 8, 2019: ''The Times of India'']
 +
 +
[[File: Repo rates, 2017 Aug- 2019 Feb.jpg|Repo rates, 2017 Aug- 2019 Feb <br/> From: [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F02%2F08&entity=Ar00503&sk=4B1D17DE&mode=text  Mayur Shetty, Das debuts as RBI guv with surprise rate cut, February 8, 2019: ''The Times of India'']|frame|500px]]
 +
 +
 +
''6-Member Panel Voted 4-2 For 25bps Reduction''
 +
 +
Unveiling his maiden monetary policy on Thursday, RBI governor Shaktikanta Das announced a quarter percentage point (25 basis points) rate cut, citing lowerthan-expected inflation. It was the first rate cut in 18 months and came after two rate increases in the interim period.
 +
 +
The decision to reduce rates was a split one. Of the sixmember Monetary Policy
 +
 +
Committee, four, including Das and RBI ED Michael Patra, voted in favour while deputy governor Viral Acharya and external member Chetan Ghate voted against cutting rates. However, a change in policy stance from “calibrated tightening” to “neutral” was approved unanimously.
 +
 +
Asked whether banks would cut rates in response, Das said he would be meeting bank chiefs within the next fortnight and raise the issue of monetary policy transmission.
 +
 +
 +
'''It was vital to act decisively, says RBI guv'''
 +
 +
The RBI governor on Thursday triggered concerns of back-tracking on the central bank’s move to peg retail loans to an external benchmark from April 2019, by referring to RBI’s earlier circular as a discussion paper. A clarification from the central bank is awaited.
 +
 +
Das also made it easier for banks to lend to top-rated finance companies. He also indicated that an interim dividend to the government was forthcoming.
 +
 +
Explaining the rationale for the rate cut, Das said it was “vital to act decisively and in a timely manner to address the objective of growth once price stability as defined (in RBI's inflation-targeting mandate) is achieved.”
 +
 +
Following the policy, the repo rate stands reduced to 6.25% from 6.5%. According to Acharya, the outlook for prices had changed in December itself following a crash in oil prices, but the central bank did not change the stance, choosing to move in small steps.
 +
 +
The RBI has forecast GDP growth of 7.4% for FY20 with the first half growth expected to be in the range of 7.2-7.4% and 7.5% in the third quarter. RBI has also forecast a CPI inflation path of 2.8% for Q4 of FY19 followed by 3.2-3.4% in the first half of FY20 and 3.9% in the third quarter of the next fiscal.
 +
 +
==2019, June==
 +
[https://epaper.timesgroup.com/olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F06%2F07&entity=Ar00300&sk=AB57C643&mode=text  Repo rate lowest since 2010 after RBI’s third cut this year, June 7, 2019: ''The Times of India'']
 +
 +
[[File: RBI's Repo Rate (% per annum, April 27, 2001- June 6, 2019).jpg|RBI's Repo Rate (% per annum, April 27, 2001- June 6, 2019) <br/> From: [https://epaper.timesgroup.com/olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F06%2F07&entity=Ar00300&sk=AB57C643&mode=text  Repo rate lowest since 2010 after RBI’s third cut this year, June 7, 2019: ''The Times of India'']|frame|500px]]
 +
 +
 +
''Seeks To Make Loans Cheaper To Boost Eco''
 +
 +
In a move that should make mortgages, auto loans and other borrowings cheaper, the Reserve Bank of India cut interest rates by 25 basis points for the third time this year and hinted at more cuts by changing its policy stance from “neutral” to “accommodative”.
 +
 +
Emboldened by benign inflation and availability of buffer foodgrain stock, the central bank’s monetary policy committee (MPC) voted unanimously to bring down the repo rate from 6% to 5.75% — the lowest since September 2010. Repo rate is the price commercial banks pay to the RBI for short-term funds.
 +
 +
Announcing the MPC decision, RBI governor Shaktikanta Das said, “Growth impulses had weakened significantly. A sharp slowdown in investment activity, along with a continuing moderation in private consumption growth, is a matter of concern.” He added that the fact that the bank’s stance was changed to accommodative meant that rate hikes were off the table for now. Responding to comments that the earlier two rate cuts were not passed on, Das said banks have passed on 21 basis points through a reduction in lending rate. “In the past the transmission took about four to six months. But this time, it has happened in two to three months’ time. Going forward we expect faster and higher transmission by banks,” he said.
 +
 +
A third reason for the rate cut was the return of the Narendra Modi-led NDA government in the polls last month, which has firmed up hopes of fiscal responsibility.
 +
 +
Following the rate cut, the bond and the forex markets reacted positively. The yield on the 10-year benchmark government bond yield fell to 6.8%, compared with Tuesday’s close of 7%. The rupee, which had weakened to 69.36 against the dollar ahead of the RBI decision, strengthened to 69.28 in afternoon trade.
 +
 +
 +
'''Sustainable biz to get capital: RBI'''
 +
 +
They (RBI) have made it amply clear to corporates and business that capital will be made available for the right sustainable businesses at competitive costs. It is truly a coincidence that the central banks of the world’s two largest democracies are well-aligned to fuel growth and help create jobs in their respective economies. We continue to expect the RBI to cut another 50bps by March 2020 in the backdrop of the Fed’s likely cut of 75bps,” said Kaku Nakhate, president and India country head, Bank of America.
 +
 +
“On the fiscal front, the governor mentioned that the government has broadly followed the fiscal glide path and is likely to stay fiscally prudent. This essentially means that unless there is a significant change in the fiscal deficit numbers for FY20 (compared to the interim budget), there could be room for the RBI to support growth through further interest rate cuts,” said Abheek Barua, chief economist, HDFC Bank.
 +
 +
“While the rate transmissions so far by the banks have only been modest in relation to the rate cuts announced, a pick-up in the pace of the monetary transmission would be one of the key drivers in supporting the growth estimates for the current year,” said Naresh Takkar, MD & group CEO, ICRA.
 +
 +
===The pressure behind RBI's rate cut hat-trick===
 +
[https://timesofindia.indiatimes.com/business/india-business/the-pressure-behind-rbis-rate-cut-hattrick/articleshow/69688585.cms  June 7, 2019: ''The Times of India'']
 +
 +
 +
The Reserve Bank of India announced a 25 basis points (0.25%) cut in repo rate (the rate at which it lends to banks), the third rate cut in a row. The repo rate now stands at 5.75%, the lowest since July 2010. The central bank also revised its GDP growth expectations for 2019-20 downwards from 7.2% earlier to 7% now.
 +
 +
It's the economy: The latest rate cut comes at a time when the economy grew at its slowest in over four years. Among the challenges the economy faces, RBI says, are: Cash crunch in the system due to lower government spending (liquidity turned into a surplus only this month after remaining in deficit in April and May), a weak global demand due to trade wars that's hurting exports and investment activity and a weakening of private consumption, especially in rural areas. Plus, India's foodgrains production has dipped, growth in manufacturing activity has weakened, automobile sales have fallen, cement production and steel consumption (key indicators of construction activity) have slowed down.
 +
 +
Challenges ahead: The central bank notes that growth impulses of the economy have weakened significantly and a sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern. Hence, it wants to support efforts to boost demand and reinvigorate private investment activity. Experts say that by changing its stance from 'neutral' to 'accommodative', RBI has communicated that the growth slowdown is real.
 +
 +
Will you gain? Though consecutive rate cuts by RBI signal a drop in cost of funds for corporates and individual borrowers, banks haven’t passed on the benefits to their customers. Bankers say it is not possible to bring down their cost of funds without reducing deposit rates and bringing them down has been difficult as deposits have grown slower than loans. In 2018-19, bank deposit growth was 10% compared to 13% growth in loans. However, things may change this time as the RBI says that liquidity in the system has turned into a surplus for the first time in at least two months. If the surplus in the banking system continues for some time, lending rates are likely to come down.
 +
 +
Go cashless: The central bank has also decided to do away with the charge it levies on banks for RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer) transactions. If banks pass on the benefits to their customers (they used to pass on RBI's charges), online money transfers could become virtually free.
 +
 +
= Loan/ debt resolution=
 +
==The NDTV case==
 +
[http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=NDTV-probe-Pvt-banks-fear-debt-resolution-may-07062017025014  Mayur Shetty | NDTV probe: Pvt banks fear debt resolution may be hit |Jun 07 2017 | The Times of India (Delhi)]
 +
 +
 +
Terming Any Loan Settlement As Criminal Raises Concerns
 +
 +
Private sector bankers say that if NDTV's loan settlement with ICICI Bank is termed criminal, it could hit resolution of bad debts. The concerns follow the Central Bureau of Investigation (CBI) alleging that ICICI Bank officials may have caused wrongful gains to NDTV promoters by agreeing to cut the interest rate to settle the loan.
 +
 +
“Settlement of any stressed loan involves some sacrifice by the banker. Often this is done to protect the loan amount since stand-off might result in loss of the principal well,“ said a banker who didn't want to be identified. If this sacrifice were to be construed as wrongful loss to the bank and a gain to the borrower, loan resolutions would not be possible, he added.
 +
 +
Multinational banks in India have been able to clean up their balance sheet the fastest as they have taken large haircuts in loans that were in default. The government is pushing for settlement of close to Rs 4 lakh crore of bad debt owed by top 50 borrowers which account for over 40% of the banking sector's bad loans.
 +
 +
Banks are likely to make a representation to the government and the RBI through the Indian Banks Association on commercial decisions being questioned. This is the second instance of CBI action against a commercial decision, the first being the arrest of senior officials of IDBI Bank on charges of improper loan sanctioning to Kingfisher Airlines.
 +
 +
The CBI, in a statement on Tuesday , said that the investigation did not pertain to loan default but to the interest relief. “ICICI Bank took the entire shareholding of the promoters in NDTV (nearly 61%) as collateral and then accepted prepayment of the loan by reducing the interest rate from 19% p.a. to nearly 9.5 % p.a. and as a consequence thereof, causing a wrongful loss of Rs 48 crore to ICICI Bank and a corresponding wrongful gain to the promoters of NDTV ,“ the agency said.
 +
 +
In May 2017, the government passed an ordinance authorising the RBI to issue directions to banks to initiate insolvency resolution process under the provisions of Insolvency and Bankruptcy Code (IBC), 2016. This new legislation was aimed at breaking the logjam in the banking industry over banks' inability to resolve over Rs 7 lakh crore of bad loans.
 +
 +
A key feature of this legislation was creation of oversight committees to ratify decision taken by bankers. Having a panel in place is expected to shield bankers from action by investigating agencies who may later look into loan recasts.
 +
 +
However, the government has said that there will not be any blanket protection for bankers. Also proposals have to be referred to the oversight panels by banks.
 +
 +
=See also=
 +
And the list is growing…
 +
 +
[[The Reserve Bank of India ]] 
 +
 +
[[Bank of Baroda ]] 
 +
 +
[[Bank of India ]] 
 +
 +
[[Bank robberies: India ]] 
 +
 +
[[Banking and the law: India]] 
 +
 +
[[Banking, India: II (government data)]] 
 +
 +
[[Banking, India: I]]
 +
 +
[[Banking, India: Loans ]] 
 +
 +
[[Banks in India]] 
 +
 +
[[Indian Bank ]] 
 +
 +
[[Indian money in foreign banks ]] 
 +
 +
[[Industries: India (ministry data)]]
 +
 +
[[Investments: India ]] 
 +
 +
[[Non-banking finance companies: India]]
 +
 +
[[Punjab National Bank ]] 
 +
 +
[[World Bank and South Asia ]] 
 +
 +
[[Raghuram Rajan]]

Latest revision as of 20:01, 11 July 2019

This is a collection of articles archived for the excellence of their content.
Additional information may please be sent as messages to the Facebook
community, Indpaedia.com. All information used will be gratefully
acknowledged in your name.

Contents

[edit] Loans

[edit] The top borrowers

[edit] Cities, 2018

Rachel Chitra, Bengalureans take most personal, car loans, January 23, 2019: The Times of India


The highest personal loan ticket sizes are in Bengaluru, at Rs 47 lakh, followed by Mumbai (Rs 40 lakh), Delhi (Rs 26 lakh) and Kolkata (Rs 30 lakh), as per data from 1.6 million loan applications in 2018 with BankBazaar, one of India’s biggest online financial services aggregators.

In the average ticket size of personal loans taken, Mumbai (Rs 2.79 lakh) was ahead of Bengaluru (Rs 2.66 lakh) and Chennai, Delhi and Kolkata.

BankBazaar CEO Adhil Shetty said the high number of large loans in Bengaluru is, perhaps, a reflection of larger disposable income and high growth opportunities. He said the city has more first-time salaried borrowers than other metros.

The data is of those who use the online mode. It’s possible that in some of the other cities, a higher proportion of people choose offline modes.

In car loans too, the top segment of Bengalureans takes higher loans than their counterparts elsewhere, suggesting they go for more flashy cars. The highest loan ticket sizes came from Bengaluru, at Rs 49.9 lakh, followed by Chennai at Rs 46.8 lakh, and Delhi at Rs 21.8 lakh.

Highest car purchase by women borrower in 2018 was at Rs 12.9L

Compared to their urban counterparts, borrowers from tier-2 and tier-3 cities restrict themselves to not spending above Rs 20 lakh for a car. Even when it came to average car loan size, rural and semi-urban borrowers were more conservative and borrowed only up to Rs 5.2 lakh, compared to their urban counterparts, who were willing to shell out Rs 5.7 lakh.

The highest car purchase by a woman borrower in 2018 was at Rs 12.9 lakh. In personal loans, Bankbazaar data shows the average ticket size in metros was at Rs 2.6 lakh, lower when compared to Rs 2.8 lakh in non-metros.

“It’s possible urban users have more choices such as credit card, and EMI options for consumer purchases on debit cards, and may not choose a personal loan as their first option,” said Shetty.

In home loans, Delhiites took the highest ticket sizes (Rs 5 crore), followed by Chennai (Rs 2.2 crore), Bengaluru (Rs 1.5 crore) and Mumbai (Rs 1.8 crore).

But this trend could only be an indicator of the buying pattern of younger, tech-savvy individuals. An SBI official said, “We get biggest home loan and car loan requests from Mumbai. It’s possible Mumbaikars prefer directly contacting their banker than going through a third-party aggregator.”

[edit] States, 2019

Disbursement of loans by private lenders, state-wise, as in early 2019
From: April 29, 2019: The Times of India


See graphic:

Disbursement of loans by private lenders, state-wise, as in early 2019

Private lenders have expanded their retail lending market share by 10 percentage points across top states in four years. The 15 states listed here account for nearly 90% of the loans. Private banks also disbursed 40% of all advances in FY19 as against 30% in FY15. Nearly 75% of the incremental gains have come from western and southern states.

[edit] The top lenders

[edit] 2008-18

2008-12: PSB banks’ share in lending
From: October 13, 2018: The Times of India
2013-18: PSB banks’ share in lending
From: October 13, 2018: The Times of India

See graphics:

2008-12: PSB banks’ share in lending

2013-18: PSB banks’ share in lending

[edit] 2017

SBI, ICICI Bank Are The First Two Lenders

The RBI added HDFC Bank to the list of systemically important banks, or banks that are considered too big to fail.The other banks on the list are the two largest lenders -SBI and ICICI Bank. Since 2015, the central bank has been identifying banks whose failure would impact the whole financial system.These banks are subject to more rigorous regulation and capital requirement.(The Times of India Sept 2017)

[edit] Loans to gems & jewellery cos

Outstanding bank loans to gems and jewellery, 2014-17
From: Sidhartha, February 19, 2018: The Times of India

See graphic:

Outstanding bank loans to gems and jewellery, 2014-17

[edit] Gender-wise size of loans, 2018

Rachel Chitra, Loan sizes higher when women borrow, January 23, 2019: The Times of India

Home loans, city-wise and gender-wise, presumably as in 2018
From: Rachel Chitra, Loan sizes higher when women borrow, January 23, 2019: The Times of India


The average ticket size of a home loan when women borrow is significantly higher (Rs 27 lakh) than when a man borrows (just under Rs 23 lakh), according to data from 1.6 million loan applications in 2018 on BankBazaar, one of India’s biggest online financial services aggregators.

BankBazaar CEO Adhil Shetty said the higher loan amount when a woman applies could indicate it’s a household with two incomes, unlike when a male applies, where he could be the only breadwinner. Banks also have special loan offers for women, with interest rates many basis points (100bps = 1 percentage point) lower than for men.

When it came to car-buying patterns, the data shows that when a woman is the primary loan applicant, they tend to steer away from big-ticket car purchases. Male borrowers borrowed up to Rs 49.9 lakh for a car, whereas the highest female car loan ticket size was Rs 12.9 lakh.

But in terms of the average car loan size taken by women, it’s significantly higher (Rs 5.5 lakh) than when men are the sole applicants (Rs 5.3 lakh). “Again, I think when women apply, they are an indicator of a double-income household,” said Shetty.

This trend of women boosting the household’s purchasing capacity could be seen across metros. The average ticket size of home loans in Delhi for women borrowers was Rs 28 lakh, compared to male borrowers at Rs 24.5 lakh. In Bengaluru, women borrowed Rs 37.9 lakh — higher than men at Rs 36.9 lakh, and in Chennai women borrowed Rs 34.8 lakh compared to men at Rs 30.1 lakh. However, the situation was the opposite in Mumbai, where men borrowed more in home loans at an average of Rs 32.8 lakh compared to women at Rs 29.7 lakh.

For personal loans, women seem to borrow less than men. The average ticket size for female applicants was Rs 2.7 lakh, compared to men who borrowed Rs 2.8 lakh.

Women seem to now have the firepower for globe-trotting just as much as men — women’s applications for travel credit cards grew 73%, slightly higher than male applications that increased 71.5%. In lifestyle credit cards too, applications from women grew at a 10.5% rate, compared to men at 8%.

[edit] Loans: Bad loans

[edit] 5 business houses alone owe PSU banks Rs. 1.4 lakh crore

The Times of India, May 06 2016

Adani Group Has Debt Of Rs. 72,000 Crore'

Raising the issue of corporate loans in Rajya Sabha, JD(U) member Pavan Verma said the Adani group had a debt of Rs 72,000 crore -an amount equal to the total debt of farmers in the country. Verma said corporate houses owed about Rs 5 lakh crore to PSU banks and particularly referred to the Adani group, alleging that the company got “unimaginable“ favours. Raising the issue during zero hour, he contended that PSU banks were influenced to give loans to people who were not able to repay them.

“PSU banks are owed abo ut Rs 5 lakh crore by corporate houses and of this, roughly Rs 1.4 lakh crore are owed by just five companies, which include Lanco, GVK, Suzlon Energy , Hindustan Construction Company and a certain company called the Adani group and Adani Power,“ he said.

“I want a reply from the government, are they aware of this or are they not. And if they are aware, what are they doing in this matter. One company owes as much as all the farmers of India,“ he further said.

The amount owed by this group both in terms of its long-term and short-term debt was around Rs 72,000 crore, Verma said, claiming to be quoting from reports. He added that on Wednesday , it was mentioned that the entire amount owed by farmers as crop loans was Rs 72,000 crore.

“I don't know what is the relationship of this government with this business house. I don't even know if they know them, but the owner of this group (Gautam) Adani is seen everywhere the prime minister has gone, every country , China, the UK, the US, Europe, Japan,“ Verma said.

“This company has been given favours which are unimaginable. In Gujarat, their SEZ was approved in spite of the high court's strictures,“ he added.

When deputy chairman P J Kurien warned Verma against making allegations, the JD(U) member said, “I am giving you factual account. It is a high court judgment. It was left to the state government.The UPA government had not approved it and when this government came to power, it was approved.“

Verma said it did not matter if Adani group had the ability to pay this amount, but in the last 2-3 years, the company's net worth had gone up by 85%.

[edit] 25% of Rs 8 lakh crore bad debt is from just 12 accounts

RBI: Just 12 accounts responsible for 25% of Rs 8 lakh crore bad debt with banks, Jun 13, 2017: The Times of India


HIGHLIGHTS

Just 12 accounts responsible for 25% of all NPAs with banks

Lenders will be asked to initiate insolvency proceedings to recover the dues

The RBI today identified 12 accounts each having more than Rs 5,000 crore of outstanding loans and accounting for 25 per cent of total NPAs of banks for immediate referral for resolution under the bankruptcy law.

Without naming the defaulters, the Reserve Bank said the lenders will be asked to initiate insolvency proceedings to recover the dues. The banking sector is saddled with non-performing assets (NPAs) worth over Rs 8 lakh crore, of which Rs 6 lakh crore is with public sector banks (PSBs). The Internal Advisory Committee (IAC), the central bank said, has arrived at an objective, non-discretionary criterion for referring accounts for resolution under the Insolvency and Bankruptcy Code (IBC).

"In particular, the IAC recommended for IBC reference of all accounts with fund and non-fund based outstanding amount greater than Rs 5,000 crore, with 60 per cent or more classified as non-performing by banks as of March 31, 2016," the RBI said in a statement.

The IAC noted that under the recommended criterion, 12 accounts with about 25 per cent of the current gross NPAs of the banking system would qualify for immediate reference under IBC, it said.

The apex bank, based on the recommendations of the IAC, will accordingly be issuing directions to banks to file for insolvency proceedings under the IBC in the identified accounts.

Such cases will be accorded priority by the National Company Law Tribunal (NCLT).

[edit] 2012-18: stressed loads

Share of stressed loans, March 2012-September 2018
From: May 22, 2019: The Times of India


See graphic:

Share of stressed loans, March 2012-September 2018

[edit] 2013-16: Loans held by ARCs

Total loans held by asset reconstruction companies: 2013-16
From: Govt may create ‘bad bank’ to take over PSBs’ NPAs, June 9, 2018: The Times of India

See graphic:

Total loans held by asset reconstruction companies: 2013-16

[edit] 2014: loans to coal sector…

NPAs (non-performing assets) as in 2013, especially bad loans to power sector. Source: The Times of India

… and scrapping of coal block allotments

Power sector bad loans may rise

Mumbai:

TIMES NEWS NETWORK

The Times of India Sep 25 2014


The Supreme Court verdict scrapping all but four coal block allotments has added to the bad loan headache of the banking industry .

Although bank exposure to coal mining sector is estimated to be below Rs 20,000 crore, the biggest fear is that coalfuelled power plants may stop producing power and default on loans. Bank exposure to power companies is around Rs 5.16 lakh crore and accounts for 9% of their loans. A large chunk of these depend on coal.

Shares of leading public sector banks dipped sharply on Monday over fears that their bad loans would rise following the Supreme Court order.

Bank of India and Canara Bank, which have large exposures to the power segment (relative to their loan book) fell 5.6% and 5%, respectively , to Rs 263 and Rs 358. Punjab National Bank, which is estimated to have the largest exposure to coal mining, fell 4.3% to Rs 927. The State Bank of India, one of the largest lenders to power in absolute terms, saw its share price fall 2.7% to Rs 2,487. Even without the coal block cancellation, several power projects and steel companies are under stress and are undergoing restructuring. Stoppage of fuel to these projects could tip them into the non-performing assets category , considering that imported coal is four times as expensive as domestic coal. Reacting to the SC order, SBI chairman Arundhati Bhattacharya said, “We believe that uncertainty is possibly the worst enemy of growth. We are glad that this is over with the SC verdict on coal blocks allocation. We now look forward for a quick plan of action for ensuring that coal supplies are not disrupted and, thereafter, a swift and transparent bidding process for reallocation.“

According to IDBI Bank chairman MS Raghavan, the bank has an exposure of close to Rs 2,000 core to the companies affected by the Supreme Court order. The bank is still assessing the impact of the verdict.

In the private sector, ICICI Bank has loans to power and steel companies that are dependent on coal supply . Earlier in an interview to TOI, Chanda Kochhar, MD & CEO of ICICI Bank, had said it was important to ensure that back-end projects that depend on coal keep producing. “The government has been talking about finding ways of reallocating coal. As long as coal is produced and power and steel plants get it, that ensures the viability of the power project; where it is allocated, who owns it and who mines it is not the primary thing. Banks had mainly extended assistance to either power or iron and steel projects,“ Kochhar had said. While deciding to cancel all but four coal blocks allotted since 1993, The Supreme Court brushed aside Coal Producers Association's (CPA) estimate that Rs 9 lakh crore linked to them would come to naught.

The CPA, through senior advocate K K Venugopal, had said that loans worth Rs 2.5 lakh advanced by banks and financial institutions would become non-performing assets. It had said that SBI has an exposure of up to Rs 78,263 crore.

Venugopal had said that apart from huge losses to other PSU banks like PNB and Union Bank, public sector entities like Rural Electricity Corporation and PFC would experi ence an even higher exposure than banks. The financial implication narrated by CPA covered many other aspects.“Huge investments up to about Rs 2.9 lakh crore have been made in 157 coal blocks as on December 2012, investments in the end-use plants have been made to the extent of about Rs 4 lakh crore, which employ 10 lakh people,“ CPA had said.

The CPA had warned of many other adverse effects -the country's dependence on coal as a primary source of fuel for up to 60% for power generation might result in inflationary trends; 28,000 mw of power capacity would be affected due to de-allocation; closure of coal mines would result in an estimated loss of Rs 4.4 lakh crore in terms of loss of royalty , cess, direct and indirect taxes; coal imports would go up even more in financial year 2016-17 to the extent of Rs 1.4 lakh crore.

A bench of Chief Justice R MLodha and Justices Madan B Lokur and Kurian Joseph cited arguments of attorney general Mukul Rohatgi to counter adverse economic fallout predicted by CPA. “It was submitted by the AG that all aspects, including the economic implications or fallout of the cancellation of coal block allotments and the possible adverse impact that it may have on other socio-economic factors, have been taken into consideration and it is only after that the affidavit has been filed by the Union of India,“ the bench said.

[edit] 2018/ Loans to the power sector

‘RBI excess capital identified by panel may back power loans’, April 4, 2019: The Times of India


The Bimal Jalan committee has to submit its report on the appropriate level of reserves to be maintained by the RBI. According to a report by Bank of America Merrill Lynch, the panel will identify excess capital of $14 billion to $42 billion, which can be used to address stressed loans in power sector.

The Supreme Court quashed a circular from the RBI forcing banks to initiate insolvency proceedings against defaulting companies. This order has paved the way for restructuring of loans to the power sector. While this is a relief to both lenders and borrowers it does not address the issue. Lenders did not want to start insolvency proceedings as projects were under implementation and would not find takers.

According to BoAML, the finance ministry should be able to form a much-needed public sector asset reconstruction or asset management company that manages banks’ nonperforming assets (NPAs) in power with the Supreme Court ruling against the February 12 RBI circular, which had adopted a one-size-fits-all approach. This had also been proposed by RBI deputy governor Viral Acharya earlier.

“Our power analyst estimates that auctioning these power NPLs will need a haircut of 75%, that is $9 billion (Rs 63,000 crore) more. Banks can then transfer the $9 billion of cleaned-up power NPLs to the ARC/AMC. This can be done by either the government recapitalizing banks by an additional Rs 7,000 crore or it can deploy excess RBI economic capital set to be identified by the Jalan committee next week,” said Indranil Sen Gupta, India Economist with Bo-AML.

[edit] Priority sector more creditworthy than corporates/ 2016

Satyanarayan Iyer, Loans to priority sector turn out more creditworthy than corporates, September 4, 2017: The Times of India

Priority sector loans, long seen as a socialist burden on banks, have turned out to be more credit worthy than advances to large corporates. During April-December 2016, banks had written off loans worth Rs 35,587 crore to large industries as against write-offs of Rs 32,445 crore of advances in the priority sector.

Also, banks could recover only Rs 16,717 crore from large industries who are in default as against Rs 25,070 crore from the priority sector.

An RBI response to a Right to Information (RTI) filing shows that inability to make timely recoveries from large businesses is forcing banks to take a huge hit on their earnings. Banks had written off Rs 68,032 crore of bad loans in the first nine months of FY17 -close to 97% of total write-offs in the whole of FY16. Given that the fourth quarter writeoffs in FY17 had been significant, the total write-offs in the last three years have crossed Rs 2 lakh crore.

CARE Ratings chief economist Madan Sabnavis said, “After the asset quality review norms were put in place by the RBI, bad loans and provisioning have risen steeply . As banks started realising a part of these bad lo ans cannot be recovered, they also started writing off more to clean their balance sheets.“ He added the situation is a result of bad lending decisions and governance issues among banks, which was supported by the “system“.

In the first nine months of FY2017, scheduled commercial banks (SCBs) wrote off Rs 35,587 core worth of loans to large industries, compared to Rs 6,628 crore written off by lenders to farm loans, Rs 8,106 crore toward MSME loans and Rs 17,711 crore wrote off to the other priority sectors.

A loan write-off does not mean that the borrower goes scot free as all recovery proceedings continue. A balance sheet write-off indicates that even if the borrower does not repay , the bank has set aside own funds to repay depositors. Similarly , the farm loan waiver announcement by state governments is not included in `write-offs' by banks. “The loan is always there in the books. They are just moved from sub-standard to standard when the government waives and makes good the loan outstanding. Only that amount of the agriculture loan is written off which is not made good by the government,“ said a senior public sector banker in charge of priority sector banking.

[edit] 2017: Bad loans at record Rs 9.53 lakh crore

Bad loans hit record Rs 9.53 lakh crore, up 5.8% in last six months, Oct 11, 2017: The Times of India


HIGHLIGHTS

Unpublished data show that bad loans in banks have reached a record Rs 9.53 lakh crore by end-June

The stressed loans have risen 5.8 per cent in last six months

Stressed loans as a percentage of total loans reached 12.6 per cent at end-June, the highest level in at least 15 years

The bad loans of banks hit a record Rs 9.53 lakh crore at the end of June, unpublished data shows, suggesting Asia's third-largest economy is no nearer to bringing its bad debt problems under control.

A review of Reserve Bank of India (RBI) data obtained through Right To Information (RTI) applications show banks' total stressed loans - including non-performing and restructured or rolled over loans - rose 4.5 per cent in the six months to end-June. In the previous six months they had risen 5.8 per cent.

While banks remain the main source of funding for companies in India, the stubborn bad debt problem has eaten into bank profits and choked off new lending, especially to smaller firms, at a time when an economy that depends on them is stalling.

The GDP grew at its slowest pace in three years in April-June quarter - a concern for the government which faces elections in 2019 and has pledged to create millions of new jobs before then. Banks are having to take higher provisions to account for more defaulters being pushed into bankruptcy and margins are likely to be squeezed further by proposed new rules to encourage commercial banks to pass on central bank interest rate cuts.

To be sure, the bulk of India's bad loans are in the state banks and stem from lending to large conglomerates, especially in steel and infrastructure. But analysts say the rise in bad loans among small firms, and even retail borrowing, is worrying and will do little to encourage new loans to help fuel growth.

"On the corporate side, we think it's a recognition cycle which is nearing an end," said Alka Anbarasu, senior analyst at Moody's Investor Service, referring to more bad loans being recognised as such, as banks come under pressure from the RBI and other regulators. "But it's really those data points beyond corporate that are causing some worry."

Anbarasu forecast weak quarters ahead for banks before profitability picks up, and several senior bankers from public sector lenders - which account for more than two-thirds of Indian banking assets - agreed the months ahead would be strained.

Stressed loans as a percentage of total loans reached 12.6 per cent at end-June, according to the RBI data, the highest level in at least 15 years.

Higher provisions, weaker loans

Part of the issue for banks and the government is a strict provisioning regime: the RBI wants banks to provide for at least 50 per cent of the secured loans to companies taken to bankruptcy proceedings, and 100 per cent for the unsecured part.

A dozen of the biggest such cases account for nearly Rs 1.78 lakh crore, or a quarter of total non-performing assets.

For those companies, banks will need to provide Rs 18,000 crore on top of existing provisions, according to July estimates from India Ratings and Research, the local affiliate of Fitch Ratings. More than 20 other sizeable companies are at risk of being taken to bankruptcy court.

Bankers say these and other pressures - including rising government bond yields that forced banks to post mark-to-market losses - have added to the squeeze, and hit new loans.

According to RBI data, new loans grew at just about 5 percent in the year to March, the lowest growth rate in more than six decades. Several banks have already cut back their loan books to conserve capital.

"What are they (RBI) thinking while they're taking these steps all at the same time?" said a treasurer at a state-run bank, who didn't want to be named due to the sensitivity of the issue. "Do they want banks to wind up their businesses, or do they want to save the banks?"

Treasury income accounted for 22.7 per cent of banks' operating profits in the last financial year, doubling its share from a year earlier, India Ratings estimates.

"The almost zero treasury income will hit provisioning ability and, in turn, make it more difficult for weaker banks to give loans as capital becomes more scarce," said Soumyajit Niyogi, an associate director at the rating agency.

A senior policymaker, who requested anonymity as the discussions are not public, said the government would have to help to sufficiently capitalise the banks.

Fitch Ratings estimates Indian banks will need Rs 4.24 lakh crore of additional capital by March 2019 to meet Basel III global banking rules. Moody's expects the top 11 state lenders alone will need nearly Rs 98,000 crore. The government has just Rs 19,500 crore left in its budget for bank recapitalisation.

"We think capitalisation is the biggest challenge for the banks at the moment, given that earnings will remain subdued and will not support any capital generation," said Moody's Anbarasu.

[edit] 2017-18: Wilful defaulters form 14% of PSB bad loans

Mayur Shetty, Wilful defaulters form 14% of PSB bad loans, January 8, 2018: The Times of India

Gross Non-Performing Assets and wilful defaulters, as in January 2018
From: Mayur Shetty, Wilful defaulters form 14% of PSB bad loans, January 8, 2018: The Times of India

With 53%, Vijaya Bank On Top Of RBI List

Around 14% of the bad loans in public sector banks (PSBs) are due to wilful defaulters. The total gross non-performing assets (NPAs) of 21 PSBs stood at Rs 7.33 lakh crore as on September 30, 2017. Of this, Rs 1.01 lakh crore of loans were termed as those in wilful default.

Wilful defaults have an element of malfeasance as it broadly means that the borrower has reneged on the agreement on usage of funds or has not paid despite having resources.

Recovery from such accounts are difficult because in many cases the money is siphoned off from the books of the defaulting company and most of them are being fought in courts. Some of the largest cases of wilful default are Kingfisher Airlines, Zoom Developers, Winsome Diamonds and Varun Industries.

Of the 9,025 cases of wilful defaults in PSU banks, lenders have filed cases against 8,423 for recovery of Rs 95,384 crore of NPAs. They have also filed 1,968 police complaints in cases of loan amounts totalling 31,807 crore. In 6,937 accounts, representing an outstanding of Rs 87,458 crore, banks have also initiated proceedings to attach and sell assets under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.

Data released by the RBI in response to a Parliament query shows that Vijaya Bank has the highest share of wilful defaulters in its books. The Bengaluru-based banks had NPAs worth Rs 6,649 crore as on September 30, 2017. Of this loans amounting to Rs 3,537 crore were on account of wilful defaults. Punjab National Bank has the highest share of wilful defaults in its books among the larger banks. Of its bad loans worth Rs 57,630 crore, 25% are on account of borrowers who have deliberately defaulted.

The implication for a business or promoter being declared a wilful defaulter is that they will never be able to get bank loans as long as they have the tag. For a lender, declaring a borrower as a wilful defaulter is a complicated process with senior bankers having to give a hearing to the borrower. In several cases, courts have ruled against the labelling of the borrower due to shortcomings in the process.

Among banks with small percentage of wilful defaulters among NPA accounts are Punjab & Sind Bank (4%), Bank of Maharashtra (5%) and Syndicate Bank (5.4%).

As on September 30, 2017, leading corporate houses accounted for approximately 77% of the total gross NPA from domestic operations for banks in India.

[edit] 2017-18/ Bad loan write-offs by PSBs surge 140% over their losses

June 15, 2018: The Times of India


HIGHLIGHTS

This is a double whammy for the struggling PSBs as they had massive write-offs as well as huge losses in the last financial year

Till 2016-17, 21 state-owned banks made combined profit while in 2017-18, they posted a staggering loss of Rs 85,370 crore, as per the data


Public sector banks have written off bad loans worth a whopping Rs 1.20 lakh crore, an amount that is nearly one-and-a-half times more than their total losses posted in 2017-18, according to official data.

This is a double whammy for the struggling PSBs as they had massive write-offs as well as huge losses in the last financial year. This is for the first time in a decade that banks have made huge write-offs of bad loans along with booking of hefty losses. Till 2016-17, 21 state-owned banks made combined profit while in 2017-18, they posted a staggering loss of Rs 85,370 crore, as per the data.

During 2016-17, PSU banks wrote off non-performing assets (NPAs) worth Rs 81,683 crore as against combined net profit of Rs 473.72 crore.

SBI alone has written off bad loans of Rs 40,196 crore, nearly 25 per cent of the total write-offs during 2017-18. This was followed by Canara Bank (Rs 8,310 crore), Punjab National Bank (Rs 7,407 crore) and Bank of Baroda (Rs 4,948 crore).

As per the data provided by rating agency Icra, Indian Overseas Bank has written of NPAs worth Rs 10,307 crore, followed by Bank of India (Rs 9,093 crore), IDBI Bank (Rs 6,632 crore) and Allahabad Bank (Rs 3,648 crore). These banks along with 7 others come under Prompt Corrective Action framework of RBI.

As per the government data, banks' write-offs stood at Rs 34,409 crore in 2013-14. The figure has jumped nearly four-fold in five years. In 2014-15, the banks wrote off Rs 49,018 crore ; Rs 57,585 crore in 2015-16, Rs 81,683 crore in 2016-17 and hitting a record high of Rs 1.20 lakh crore (provisional) in 2017-18.

Write-off in banking parlance means that the bank has made 100 per cent provision from its earning against that account. Following this, NPA is no longer part of its balance sheet.

However, a write-off puts pressure on balance sheet of banks as it erodes operating profit.

Indian banking sector is grappling with mounting NPAs and host of scams and frauds. NPA in the banking sector stood at Rs 8.31 lakh crore as of December 2017.

Weak financials due to mounting bad loans have already pushed 11 banks, out of 21 , under the Prompt Corrective Action (PCA) framework of RBI.

The recent tight prudential norms released by RBI on February 12 have added to the NPA woes.

Interim Finance Minister Piyush Goyal has announced setting up of a committee to give recommendations in two weeks on formation of an Asset Reconstruction Company (ARC) for faster resolution of stressed accounts.

The committee under Sunil Mehta, non-executive chairman of PNB, will make recommendations for the same.

The finance minister said the committee will consider whether such an arrangement will be good for the banking system and, if any such suggestion is advisable, it will also consider the modalities by which such an ARC should be set up.

[edit] How ‘haircuts’ help in dealing with bad loans

July 9, 2018: The Times of India

The banks with the highest NPAs, 2017-18; 2012-18- The ratio of restructured loans to total assets; and; 2012-18- The ratio of gross
From: July 9, 2018: The Times of India

As the government looks to reel in the likes of Nirav Modi and Vijay Mallya, who have sought shelter on foreign shores after leaving behind huge outstanding loans in India, a panel has come up with recommendations to help state-run banks achieve faster resolution of their non-performing assets. A look at these bad loans and how deep the problem is...


How are haircuts a solution to the NPA crisis?

One reason private and foreign banks have a lower level of NPAs is they have the flexibility to cut their losses by selling off assets in a bad loan for whatever it is worth. In the case of public sector banks, selling a loan or a company for less than the outstanding loan was not feasible as it would trigger action by Central Vigilance Commission, Central Bureau of Investigation and Comptroller and Auditor General. It is only now that the bankruptcy code provides a framework for selling assets at a discount to the loan amount (taking a haircut).

What caused this pile-up?

Post global financial crisis, RBI and the gover nment relaxed lending nor ms to stimulate the economy and allowed banks to lend more to projects as part of a countercyclical measure. The government also allowed banks to ‘restructure’ project loans that were going into default by giving borrowers more time and more money. Loans of these troubled borrowers were classified as ‘restructured’ and not NPAs.

How much money would banks lose if they took haircuts on NPAs?

Losses reported by banks so far include the part-provisions made on existing NPAs. According to CLSA, the top-32 NPAs facing action under the bankruptcy code account for Rs 4 lakh crore or 45% of total NPAs. CLSA estimates the haircut on these loans are less than 60%. Banks must make provisions for at least half the loan amount in case of bankruptcy.

What is the NPA crisis?

NPAs or non-performing assets are loans for which borrowers are unable to meet repayment obligations. Ideally, these should be within 2% of total assets (loans) for banks. Bad loans beyond this level are difficult to manage as banks work with narrow margins and the interest spread they earn is not enough to make up for the losses from defaults. For public sector banks it has reached crisis level with gross NPAs at 14.6% — almost three times the level of 4.9% for private banks.

Why did NPAs blow out in FY18?

In 2017, the new insolvency law came into effect. It provided a resolution mechanism for bad loans, enabling companies to be sold. Earlier under Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, lenders could sell assets but not businesses as a whole. With a mechanism in place, RBI removed restructuring schemes, asking banks to come clean on bad loans. As a result, provisions rose to Rs 3.2 lakh crore in FY18 from Rs 2 lakh crore in FY17, surpassing operating profits of banks.

What are the haircuts that are talked about?

Under the Bankruptcy Code, borrowers unable to repay their dues face insolvency proceedings in the National Company Law Tribunal. Under the insolvency process, a resolution professional is appointed to invite bids for the bankrupt business. The difference between the best bid and the borrower’s total outstanding dues is the haircut.

[edit] CVC finds many flaws in sale of bad debt/ 2019

Sidhartha, March 18, 2019: The Times of India

The Central Vigilance Commission (CVC) has pointed to several irregularities in transactions involving non-performing loan accounts. Some guidelines which should be followed are mentioned above
From: Sidhartha, March 18, 2019: The Times of India


Review Points To Several Lapses In Deals, Govt Orders Scrutiny

In high season for sale of bad loans to asset reconstruction companies (ARCs), the Central Vigilance Commission (CVC) has pointed to several irregularities in transactions involving non-performing loan accounts, prompting the government to initiate action against errant executives.

“Instances have come to the notice of the commission, wherein prudence has not been observed, while taking decision on sale of stressed asset to ARCs. Irregularities have been noticed in estimating the value of underlying securities (which) is much higher that the value at which the assets were sold to ARCs, post-sale realisation from assets, management fees and expenses charged by ARCs, etc,” the CVC said after an analysis of 302 cases of over Rs 50 crore from 2014-15 to 2017-18.

In at least 48 cases, assets were sold to ARCs below the realisable value of securities that the borrower had given as security at the time of availing of the loan. In several cases, banks were found to be fixing the reserve price without factoring in the accrued interest, resulting in banks having to take a deeper haircut, the CVC said in its report to the government. It also said that in case of companies that are sold as a “going concern”, the primary value of stocks and equipment were not factored in, while fixing the reserve price.

Similarly, in 55 cases, assets were sold within a year of the date of the account turning into a non-performing asset (NPA), without banks initiating recovery action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.

In all, 22 irregularities and gaps in regulations have been pointed out by the vigilance body, prompting the government to swing into action.

The department of financial services has written to all staterun banks, asking them to analyse all accounts of over Rs 50 crore and initiate action after examining accountability of executives and lodge complaints with law enforcement agencies.

While bankers acknowledged that there may be instances of improper transactions, they said the latest advisory is prompting many lenders to go slow on asset sales — which typically peak at the year-end. Some of the bankers said this may result in several loans, which would have been sold, remaining on their balance sheets.

[edit] Loans and Defaulters

[edit] Wilful defaulters:38% rise, 2012- 2015

The Times of India, May 04 2016

Banks with highest growth in default cases, 2012-15; Graphic courtesy: The Times of India, May 04 2016

The number of wilful defaulters, who have not repaid their loans to public sector banks despite having the ability to do so, shot up by 38% to 7,686 at the end of December 2015, compared to 5,554 in December 2012, with lenders finally starting to issue the tag amid rising bad debt plaguing the Indian economy.

The amount involved in these cases has shot up 2.4 times to Rs 66,190 crore, compared to around Rs 27,750 crore three years ago, the government informed Parliament.

Bankers, however, war ned that some of the banks may still have kept a few firms and their promoters out of the net. “Banks have not done a complete exercise to identify all wilful defaulters in line with RBI guidelines,“ said Deepak Narang, a former executive director of United Bank of India. No one certifies that all the wilful defaulters have been identified. There has been an increase in recent years but not all accounts have been identified,“ Narang said.

He furnished the exam ples of Indian Overseas Bank and United Bank, where the numbers of such defaulters have come down. “How is that possible when the NPA in the system is rising and banks are reporting losses?“ RBI rules require banks to declare a borrower `wilful defaulter' if it has defaulted in repayment despite having the capacity to honour the obligation. Similarly , a defaulter who has diverted or siphoned off the funds, or has disposed off fixed assets or immovable property , can be given the tag.“The default to be categorised as wilful must be intentional, deliberate and calculated,“ the guidelines say .

Under pressure from RBI to act against defaulters, banks have begun to crack the whip only in recent months.As a result, lenders such as PNB have seen a massive spurt in the number of wilful defaulters -from 71 to 904 in three years (see graphic). In value terms too, PNB tops the list in terms of the growth rate with the amount involved jumping from Rs 199 crore at the end of December 2012 to almost Rs 11,000 crore at the end of 2015. Indian Bank and Andhra Bank (over 7times each).

SBI and its associates, which account for nearly a quarter of banking business, are at top of the pile in terms of amount involved but their share is around 28%, compared to 35% at the Dec-end of 2012, indicating that nationalised banks have only now begun to take exercise seriously .

[edit] 2017: wilful defaulters owe ₹1 lakh cr+ to banks

Atul Thakur, India’s wilful defaulters owe more than ₹1 lakh cr to banks, February 23, 2018: The Times of India

2017: Indian banks’ 11 largest wilful defaulters
How the debt has grown, 2008-2017
From: Atul Thakur, India’s wilful defaulters owe more than ₹1 lakh cr to banks, February 23, 2018: The Times of India


As on September 30, 2017, more than Rs 1 lakh crore was owed to banks by people or companies characterised as “wilful defaulters”, that is those who are unwilling to pay despite having the capacity to do so. TOI analysed more than 9,000 such accounts for which banks have filed lawsuits for recovery and found that the top 11 debtor groups, each with dues of over Rs 1,000 crore, together had over Rs 26,000 crore outstanding to the banks.

Analysis of the publicly available data for suit-filed accounts (wilful defaulters) of Rs 25 lakh and above shows that Jatin Mehta-promoted Winsome Diamonds & Jewellery Ltd and Forever Precious Jewellery & Diamonds Ltd owed close to Rs 5,500 crore to various banks. Mehta is reported to be now a citizen of St Kitts and Nevis, a tax haven with which India doesn’t have an extradition treaty.

Mehta’s companies are followed by Vijay Mallya’s Kingfisher Airlines, which has to pay back over Rs 3,000 crore under this head. The third in the list is REI Agro, a company owned by Sandip Jhunjhunwala, which, according to news reports, was once listed in London and Singapore stock exchanges and was co-sponsor of an IPL team. It owes Rs 2,730 crore.


Bad loans grew 4-fold to ₹1.1L cr during 2013-2017

Next in the list are the companies owned by Prabodh Kumar Tewari and his family members. The amount outstanding on Mahuaa Media, Pearl Studio Pvt Ltd, Century Communication and Pixion Media Pvt Ltd is Rs 2,416 crore.

The other companies that owe more than Rs 2,000 crore and are unwilling to pay despite having the means, according to the banks, are Zoom Developers Pvt Ltd promoted by Vijay Choudhary, Reid & Taylor (India) Limited & S Kumars Nationwide Limited, both promoted by Nitin Kasliwal, and media baron T Venkatram Reddy’s Deccan Chronicle Holdings Limited.

The data shows the alarming rate at which these bad loans are growing. In the past one year it has increased by about 27%. In the previous three years, it had increased by 38%, 67% and 35%, respectively.

Thus, between September 2013 and September 2017, the amount has quadrupled from Rs 28,417 crore to over Rs 1.1 lakh crore. While some of this would be due to interest being added each year, the quantum of the increase is too large to be entirely or even mainly due to that.

The RBI defines “wilful default” as defaults done despite the borrowers’ paying capacity. Money diverted for purposes other than the specific purpose of finance, or siphoned off and hence not available as assets to the borrower also qualifies as wilful default. Borrowers who have sold fixed assets that they provided as collateral to secure the loan without informing the bank also come under this category.

The cumulative total of more than 50 companies or groups each with over Rs 250 crore of wilful default works out to about Rs 48,000 crore. To put that in perspective, it is only slightly less than the government’s allocation of Rs 52,800 crore for health in the 2018-19 Budget.

Bank-wise analysis of data shows nationalised banks (excluding SBI and associates) constitute about 60% of this money. SBI and its associates account for one-fourth of the total. Private sector banks have also declared over Rs 14,000 crore as wilful defaults.

[edit] Defaults by gems, jewels companies, till 2017

Chethan Kumar, PNB lost four times more money than SBI did to jewel thieves, February 23, 2018: The Times of India


Highly cash-dependent traders in gems and diamonds have cost banks at least Rs 5,000 crore through 90 defaults, bank-wise and company-wise data on wilful defaulters compiled by the Federation of Bank of India Staff Unions (FBISU) shows.

The top loser is PNB, with just nine defaulters but a loss of Rs 1,790 crore — four times the amount SBI lost.

SBI reported the most number of wilful defaults(15) and lost Rs 410 crore (see table). PNB, incidentally, has lost the most among banks.

According to FBISU data, the total number of wilful defaulters is a little over 5,000, costing banks about Rs 49,000 crore, but the latest RBI data shows the numbers have jumped to 8,915 and Rs 92,376 crore, respectively. Of these wilful defaulters at the end of March 2017, PNB had the most (1,120), followed by SBI (997).

At least two bankers TOI spoke to said the exposure to gems and jewel companies must have also increased multifold. “Given that this data doesn’t include the recent PNB scam, the final number could point to one of the worst frauds the sector has seen,” one of them said.

Small and big loans have remained unpaid, while companies like Winsome, Beautiful Diamonds and Auro Gold Jewellery have defaulted with multiple banks. In some cases, banks are in the process of recovery, while in others investigations are pending.

Among the various means used to exploit banks is changing the names of companies and borrowing.

Data shows that Beautiful Diamonds was earlier called Splendour Gems, while Auro Gold Jewellery Private Limited later dropped the word “Private” from its name. Another firm, Ghanshyandas Gems and Jewels, later became “Ghanshyamdas”.

“The diamond trade is highly cash-dependent and the source of major money laundering. It may be conceivable that diamond merchants resorted to higher borrowing through Nostro accounts overseas to deal with the setbacks caused by constriction of the cash economy,” Tobby Simon of Synergia Foundation, a multidisciplinary think tank, said.

Experts, while pointing out how the total recapitalisation amount PNB received was about Rs 5,473 crore, pushing the bank’s net worth to Rs 20,000 crore, said that assuming the best scenario of recovery (of the Rs 11,300 crore) is 50%, the fraud has wiped out the entire money taxpayers had coughed up to recapitalise the bank.

Among other banks that suffered are Union Bank of India with nine defaults and Oriental Bank of Commerce with eight defaults.

Professor Charan Singh, former RBI chair professor at IIM-B, while calling for a complete overhaul of the banking system, cautioned against politicising the issue. “There’s a need to consider the sentiments of the public. Overreaction in the public domain can only deter depositors from banking, and bankers from lending.”

[edit] 2018, March: The biggest defaulters

See graphic:

The biggest defaulters, as in March 2018

[edit] Riot defaulters exempt

The Times of India, May 03 2016

Defaults can't bar Guj riot-hit from special loans: HC

The Gujarat high court has held in a case that a bank cannot deny loan under special policy for 2002riot affected because the applicant had defaulted in payments earlier. The HC has asked the state government and Bank of India to extend loan to a 2002-riot affected trader from Bhavnagar, Usman Ghani Aadhiya, who had defaulted in an earlier loan from the same bank. The bank was refusing to pay him a fresh loan after riots on the ground of his earlier default.

Aadhiya had suffered damage of Rs 5.1lakh to his business in the riots and was thus entitled to a loan at 4% flat interest from a bank according to policy.The HC said it was not permissible for the bank to exclude him from extending the loan because he falls in the category of the riots affected.


[edit] Loan defaulters’ rights

The Times of India, Apr 18 2016

PREETI KULKARNI

Five rights loan defaulters should know of

If you have defaulted on loan repayment and the bank wants to repossess your assets, all is not lost

If you have defaulted on a loan, the rules do not give the lender a complete walko ver. Keep the following points in mind if you find yourself in such a situation.

Right to ample notice

A default does not strip you of your rights.Banks have to follow process and give you time to repay dues before repossessing your assets to realise the arrears. Typically, banks initiate such proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Secu-rity Interests (Sarfaesi) Act. If the borrower's account is classified as a non-performing asset, where repayment is overdue by 90 days, the lender has to first issue a 60-day notice.

“If the borrower fails to repay within the notice period, the bank can go ahead with sale of assets. However, in order to sell, the bank has to serve another 30-day public notice mentioning the details of the sale,“ says banking and management consultant V.N.Kulkarni.

Right to ensure fair value

The lender starts the process of auctioning your property to recover dues if you fail to clear what you owe or respond during the 60-day notice period. However, before doing so, they will have to issue another notice specifying the fair value of the secured asset as assessed by the banks' valuers, along with details like reserve price, date and time of auction. “The borrower can object if the property is undervalued. He can justify his objection by conveying any better offer that he may have so that the bank can make a decision,“ says Kulkarni. In other words, you can look for prospective buyers on your own and introduce them to the lender if you think that the property can yield a better price.

Realise balance proceeds

Do not write off your asset mentally the moment it is repossessed. Keep track of the auc tion process. Lenders are required to refund any balance after recovering the dues, which s a real possibility given that property pric es can shoot up beyond the owed amount After recovering the dues and expenses of conducting the auction, the bank has to re und the remaining amount to the borrower as the money belongs to him,“ says Kulkarni

Right to be heard

During the notice period, you can make your representation to the authorised officer and put forth your objections to the repossession notice. “The officer has to reply within seven days, giving valid reasons if he rejects the representation and objections raised by the borrower,“ says Kulkarni.

[edit] Frauds below Rs 1L not to be reported to police: CVC

Don't report frauds below Rs 1L to police, CVC asks banks, The Times of India, Jun 17 2017


The Central Vigilance Commission (CVC) has asked public sector banks not to report frauds below Rs one lakh to local police, unless their staff is involved in such crimes. Earlier banks were mandated to report fraud of above Rs 10,000 and below Rs 1 lakh to police.

The decision was taken by the CVC in consultation with the Reserve Bank of India (RBI), taking into account the practical difficulties faced by public sector banks in reporting such categories of cases.

It has been decided that only if staff of the bank is involved in the fraud cases of below Rs 1 lakh and above Rs 10,000, would such cases need to be reported or complaint filed with local police station by the bank branch concerned, the commission said in a directive to chiefs of all the banks.

The cases of frauds of upto Rs one lakh and not below Rs 10,000 are to be scrutinised by banks officials concerned for further necessary action, a senior CVC official said.

As of September 30, 2016, the Non-Performing Assets (NPAs) declared by various scheduled commercial banks stood at a whopping Rs 6,65,864 crore, according to an official data. The NPAs of the country's largest lender State Bank of India is Rs 97,356 crore, followed by Rs 54,640 crore of Punjab National Bank and Rs 44,040 crore of Bank of India, it said. Bank of Baroda has NPAs of Rs 35,467 crore, Canara Bank Rs 31,466 crore, Indian Overseas Bank Rs 31,073 crore, Union Bank of India Rs 27,891crore.

[edit] Loans: recovery of

[edit] 'Lender can't seize vehicle without prior notice'

Dipak K Dash, 'Lender can't seize vehicle without prior notice', April 8, 2018: The Times of India


A finance company cannot forcibly take possession of a vehicle for non-payment of dues without sending a notice to the borrower, country's apex consumer commission has said.

The National Consumer Disputes Redressal Commission (NCRDC) on Friday ordered a private finance company to pay Rs 80,000 to the borrower whose tractor was seized by the company in January, 2011 for alleged non-payment of dues.

Directing Shriram Transport Finance Company to refund the amount, which the borrower had paid to the company, with 9% interest within four weeks, single-member bench of M Sreesha said, "In my opinion, a seizure of the vehicle in such circumstances violating the principles of natural justice without giving an opportunity to the borrower to show his bona fides, amounts not only to unfair trade practice but also deficiency of service for which the financier is liable to compensate the complainant."

The NCDRC relied on the "vehicle repossession notice" by the company to the borrower, which showed that the notice was issued 10 days after the actual date of repossession of the tractor and the Commission observed that this "cannot be stated to be a notice prior to repossession which is in contravention of the principle of natural justice".

The case dates back to December 2009 when one Sakharam Sahu of Durg in Chhattisgarh had purchased the tractor with Rs 1 lakh loan after mortgaging his vehicle. Sahu needed to pay Rs 4,677 monthly instalment for 31 months. The finance company took possession of the vehicle on January 15 in 2011 as the borrower did not pay the instalment "despite repeated demands". The company had raised a demand of Rs 1.30 lakh. Sahu had submitted that he had repaid Rs 80,000 out of the total Rs 1 lakh loan and hence the company demanding Rs 1.30 lakh was "unjustified". The finance company took possession of the vehicle in January, 2011.

Aggrieved by the action, Sahu approached the district consumer forum, but did not get any relief. Though he later challenged the order in the state commission, it upheld the district forum's order. Finally, he challenged the state commission order in the NCDRC in 2014.

The NCDRC observed, "It is relevant to note that the notice is admittedly dated 25.01.2011, whereas in the body of the letter it is stated that the vehicle was taken into possession on 15.01.2011 at 2 pm. Viewed from any angle this repossession notice which dated 10 days after the actual date of repossession cannot be stated to be a notice prior to repossession which is in contravention to the principles of natural justice."

[edit] 2018: RBI issues circular to treat defaulters as insolvent

April 3, 2019: The Times of India

How the story unfolded- February 12, 2019 circular (to treat defaulters as insolvent) by the RBI
From: April 3, 2019: The Times of India


The Feb 12 circular placed the RBI in a lonely corner — business houses were up in arms, banks were upset at having to make large-scale provisions and the govt was unhappy because several under-construction power projects faced the prospect of liquidation


WHAT IS THE CIRCULAR ABOUT?

On February 12, 2018, the RBI wrote to banks asking them to classify as a defaulter any company that fails to meet the payment deadline even by a day. The circular also forced banks to drag these companies to bankruptcy court if the defaults were not resolved in 180 days. The circular did away with various loan-restructuring schemes that aimed to give stressed borrowers more time to repay.


WHY WAS IT ISSUED?

The circular was issued after the Insolvency and Bankruptcy Code (IBC) came into force. Until the IBC laws were enacted, defaulters had the upper hand as banks could avoid making provisions towards non-performing assets (NPAs) by giving them more time and restructuring the loan. However, experience showed that restructuring only delayed and worsened the problem and the dues of these companies snowballed because of restructuring and all of them defaulted.

The RBI’s objective was to get banks to clean up their books by selling defaulting companies and not postponing the problem through restructuring.


WHAT’S THE IMPACT?

The circular resulted in banks classifying a larger chunk of their loans as NPAs. The first quarter of FY19 saw 21 PSU banks reporting a loss of Rs 16,600 crore as against a loss of Rs 307 crore a year earlier. Losses continued to rise for the second and third quarters. For public sector banks, gross NPAs hit 10.9% as of December 2018.

Most of the loans that were restructured in the earlier years turned into NPAs.


WHO OPPOSED IT?

The lead in the legal battle against this directive was taken by an association of power producers, representing projects with loans of over Rs 1.73 lakh crore. Of this, Rs 34,000 crore of defaults were because government departments did not make payments in time or due to policy changes. Later, other industries too became part of the suit with the RBI fighting a lone battle on the other side.


WHY DID THE SC STRIKE IT DOWN?

The apex court observed that the RBI had the power to give directives to banks to proceed against companies in the event of a default but cannot give directions in respect of debtors generally. While the argument was confined to RBI’s power to direct banks to initiate insolvency proceeding against debtors in general, the final order struck down the entire circular as ‘ultra vires’ (beyond one’s authority).

[edit] 2019/ SC quashes the RBI circular

Amit Anand Choudhary & Dhananjay Mahapatra, SC quashes stringent RBI circular against defaulters, April 3, 2019: The Times of India

Impact of SC’s 2019 order quashing RBI’s 2018 circular to treat defaulters as insolvent
From: Amit Anand Choudhary & Dhananjay Mahapatra, SC quashes stringent RBI circular against defaulters, April 3, 2019: The Times of India


Debt-Laden Power Sector To Benefit Most

In a big setback to efforts for recovery of bad debts of companies owing Rs 2,000 crore or more to banks, the Supreme Court on Tuesday quashed the RBI’s February 12, 2018, circular, which directed banks to move against defaulters under the Insolvency and Bankruptcy Code (IBC) on their failure to pay up within 180 days from March 1, 2018.

A bench comprising Justices R F Nariman and Vineet Saran also quashed all IBC proceedings initiated by banks under the RBI circular against defaulters.

Thus, the apex court turned the clock back to March 1, 2018, giving a huge relief to defaulters who owe Rs 2,000 crore or more to banks.

“All actions taken under the said circular, including action by which the Insolvency Code has been triggered, must fall along with the said circular,” it said.

However, this ruling will not affect initiation of IBC proceedings by banks against big defaulters taken before, or independent of, the RBI circular.

One such example is the IBC proceedings launched by a State Bank of India-led consortium against Essar Steel, which on culmination of proceedings is set to be taken over by Arcelor Mittal. Essar Steel had a debt of Rs 45,000 crore.

Writing the 84-page judgment, Justice Nariman accepted the main plea of senior advocate A M Singhvi, who appeared for the Association of Power Producers and argued that peculiarity of stress factors in each sector would not permit the RBI to bracket defaulting companies in different sectors for proceeding under IBC.

Singhvi’s arguments were adopted by other counsel who appeared for defaulting companies operating in varied sectors including telecom, steel, infrastructure, sports infrastructure, sugar, fertilisers and shipyards.


SC: Circular illegal due to lack of Central authorisation

Although the SC accepted senior advocate Rakesh Dwivedi’s arguments and upheld the constitutional validity of Section 35AA of the Banking Regulation Act, which empowers the Centre to exercise the power itself or authorise the RBI to direct banks to proceed against specific defaulters, it found the February 12 circular to be illegal as there was no such authorisation from the Centre to RBI to direct banks to proceed against defaulters by specifying a default limit and a 180-day period.

“The Banking Regulation Act specifies that the central government is either to exercise powers along with the RBI or by itself. The role assigned by Section 35AA, when it comes to initiating the insolvency resolution process under the Insolvency Code, is thus, important. Without authorisation of the central government, obviously, no such directions can be issued,” the bench said.

Referring to Section 35AA, the bench said, “It is clear that directions that can be issued by the RBI (to banks) under Section 35AA (with authorisation from Centre) can only be in respect of specific defaulters by specific debtors. This is also the understanding of the central government when it issued the notification on May 5, 2017, which authorised the RBI to issue such directions only in respect of ‘a default’ under the Code. Thus, any direction in respect of debtors generally, would be ultra vires (in violation of) Section 35AA.”

Justices Nariman and Saran also said the RBI circular “applies to banking and nonbanking institutions alike, as banking and non-banking institutions are often in a joint lenders’ forum which jointly lend sums of money to debtors. Such non-banking financial institutions are, therefore, inseparable from banking institutions insofar as the application of the RBI circular is concerned”.

Having clarified this, the bench said proceedings initiated by both banking and nonbanking financial institutions under the circular would have to be quashed along with the circular.

[edit] 2018: PNB gets vigilance prize, Govt explains why

Govt explains why PNB got vigilance prize, March 9, 2018: The Times of India


The government informed the Rajya Sabha that the Central Vigilance Commission (CVC) had conferred the ‘vigilance excellence award’ to chief vigilance officer (CVO) of Punjab National Bank (PNB) purely for best disposal rate of cases relating to disciplinary proceedings initiated in 2016.

Replying to a question, minister of state for personnel Jitendra Singh said the awards were conferred in 2017 for the first time under various categories to chief vigilance officers (CVOs), vigilance functionaries and management of six public sector banks for work done in 2016.

For the award in the category ‘timely completion of disciplinary proceedings’, Singh told the Elders, CVO of Punjab National Bank had the best disposal rate (92%) of vigilance complaints, among four eligible entries.

Disciplinary proceedings were finalised in 187 cases out of a total of 203 cases within the prescribed timeline of six months for major penalty and three months of minor penalty, he added. The vigilance award had raised eyebrows as it came in the wake of outbreak of the PNB scam involving jewellers Nirav Modi and Mehul Choksi.

[edit] Loans: Education loans

[edit] Education loan specialists grow faster

Mayur Shetty|Edu loans attract specialist lenders|Jul 12 2017: The Times of India (Delhi)

Edu loans attract specialist lenders

Mumbai

Pvt Players Positive On Growing Biz Education loans advanced by banks have grown by a measly 2.7% in FY17--half as much as the average growth rate of all loans.But that's only half the story .Specialist lenders are growing rapidly and private players are looking at this segment. Education loan specialists like HDFC Credila and Avanse have seen growth rates ranging from 40% to 70% in disbursements even as new age lenders like InCred Finance are eyeing the sector. Ajay Bohora, co-founder and CEO of HDFC Credila, says it's clear there is great demand. The shift in government focus to primary schooling has resulted in private in stitutions filling the gap in tertiary education. Secondly , in India and globally , cost of attendance (fees and other expenses) for tertiary education has been rising faster than inflation which is taking it out of reach of the middle class. HDFC Credila has disbursed Rs 1,300 crore of loans in FY17, which is slightly lower than the Rs 1,800 crore increase in the education loan portfolio of banks.

Bankers say they have pulled back from education loans because bad loans are high(7-8%). This is particularly true for the sub-Rs 4 lakh category where banks do not demand any security.

According to a senior PSU bank official, the reasons for the defaults are two-fold. One, engineering and management institutions have mushroomed but the quality of education has not been up to the mark. Two, many students relocate after graduation and their loans turn into NPAs.

“A lot of education loans are probably camouflaged as personal loans or loans against property ,“ said Prashant Bhonsle who heads the education loan vertical at InCred Finance. According to Bhonsle, students are rushed for time and at many banks it is faster to get a personal loan or a loan against property .The downside is that the interest paid cannot be claimed as deduction under Section 80E of the I-T Act. Also, repayment of such loans begins immediately , unlike education loans where there is a repay ment holiday . Also, education loans have tenures ranging from one to 12 years depending on course duration.

According to Rajnish Kumar, MD, State Bank of India, the outlook for education loans has improved with the government introducing a credit guarantee scheme for borrowings up to Rs 7.5 lakh in 2015. “The recovery problems that we faced in the south are now behind us and we will be growing the portfolio,“ said Kumar.

The ground reality is that unsecured education loans are a viable business only in segments where employment is certain. As a result, only those who qualify for top management or engineering institutes can expect to cover fees through bank financing without collateral. For others, a loan above Rs 7 lakh would invariably require property as collateral from parents.

Growth of education loans and bank credit, 2008-17.

Private lenders are positive as they have the skills and they can be selective.“Appraising a loan application is not easy because there are over 700 universities in India--some, like the University of Pune, have over 600 affiliated colleges, with each having 20-30 courses--and for credit assessment it's important to know the employment opportunities for each course,“ said Bohora.

It is not just finance companies, even lenders like Axis Bank, which was earlier a small player in education loans, has now created a new vertical for this product and is planning to grow. “We have grown 100%, although on a small base, and we see potential in this business,“ said Rajiv Anand, head of retail at Axis Bank. However, the bank is focusing on higher education in premier institutions like IIMs where both employment opportunities and fees are high. “The advantage for us is that we have good banking relationships with several trusts and educational institutions which makes it easier to partner with them for education loans,“ said Anand.

[edit] 2017: Defaults highest in govt designed education loans

Mayur Shetty, Defaults highest in govt-designed education loans, Aug 30, 2017: The Times of India


The government-designed education loan scheme, which accounted for half of all education loans five years ago, now amounts to only a fifth. The scheme provides for loans up to Rs 4 lakh without collateral.

Banks are withdrawing from this segment, which is seeing the highest level of defaults. A study by TransUnion Cibil shows that defaults in education loans are lowest (below 1%) on big ticket loans of over Rs 15 lakh, which are typically taken for post-graduate MBA programmes in reputed institutes.

TOI had earlier reported how lenders were shifting focus on high-value loans as defaults in the sub-Rs 4 lakh category rose. The reasons cited by banks are now borne out by the data released by Cibil, which shows that the industry has experienced a default ratio of 8.1% on loans below Rs 4 lakh. Incidentally, most of these smaller-ticket education loans were disbursed by public sector banks.

According to Harshala Chandorkar, chief operating officer of TransUnion CIBIL the pattern of defaults raises the question whether the market is lagging in creating new job opportunities for those graduating from category II and III academic institutions.

"While delinquencies may be still better than the overall ratio of non-performing assets of many banks, the defaults are much higher than in other personal loan segments whether it is home loans, consumer durable loans, or even credit card outstanding," she said. Incidentally, the defaults that are now being experienced by banks are in respect of defaults witnessed on loans disbursed a few years earlier as education loans contain a moratorium, giving them time until they start earning to repay the loan.

TransUnion CIBIL research also indicate that since 2012, the number of new education loans disbursed annually has been showing flat to negative growth. The overall amount of loans disbursed has been showing a steady positive growth. This growth is driven by a marked shift towards loans of ticket size over Rs 15 lakh, which currently amount to over half the loan amount disbursed.

[edit] 2015>’17: Defaults increase 47% on weak job market

Education loan defaults soar 47% on weak job mkt, December 23, 2017: The Times of India

A weak job market and wilful default by even those in well-paying jobs have hit the education loan portfolio of state-run banks with non-performing assets soaring by almost 47% between March 2015 and last March, data shared in Parliament showed.

The finance ministry told the Lok Sabha that NPAs, or bad debt, went up from Rs 3,536 crore at the end of March 2015 to Rs 5,192 crore on March 31, 2017. The surge took place in 2015-16, with the pace slowing down during the last financial year. The problem is so acute for at least five lenders that the stock of bad loans has more than doubled, with UCO Bank and Indian Bank leading the pack. At the same time, the increase in loan flow has also been less than 10% during this two-year period.

‘Absence of guarantees makes it easy to default’

But what is even worse is that there was only 3.4% riseduring 2016-17, on the back of a 5.6% growth in the previous year, indicating that either demand was tepid or banks were reluctant to lend. Bankers, however, said that they had not gone slow on education loans.

They said that defaults were rising as several students had not found good jobs, especially when it came to those who pursuedMBAsor engineering degrees.

However, there are cases where even students from good colleges who were employed by leading companies are refusing to pay.

For instance, an engineer with a global technology giant stop repaying theloan and was tracked down through social media. When confronted, he cleared the dues, said a bank executive. “The problem isthe absence of security and guarantees, which makes it easy todefault,” he added.

The government toldParliament that to reduce the incidence of NPA in education loans, the IBA Model Education Loan Scheme has been modified to factor in the the needs of students. The changesinclude a repayment holiday or a moratorium of course period plus one year, additional moratorium to account for spells of under-employment or unemployment, and extension of the repayment period to 15 years to reduce the equated monthly instalment.

The Centre has also launched a CreditGuaranteeFund Scheme for Education Loans (CGFEL) for loans upto Rs 7.5 lakh to provide guarantee up to75% of thedefault amount.

[edit] 2014-19: Education loans shrink 25%

Rachel Chitra, May 25, 2019: The Times of India

Rachel Chitra, May 25, 2019: The Times of India


Number of students getting loans (in lakh)- March 2015-19;
Average size for new loans disbursed during the year, March 2015-19;
Amount disbursed, 2015-19;
NPA (% of loan advances), March 2015-19;
From: Rachel Chitra, May 25, 2019: The Times of India
2014-19- Education loans shrank 25%
From: Rachel Chitra, May 25, 2019: The Times of India


The number of education loans disbursed in India has shrunk by as much as 25% in the past four years. The number of students able to secure loans fell to 2.5 lakh as of March 31, 2019 from 3.34 lakh students as of March 31, 2015.

High non-performing assets levels, which have nearly doubled to 12.5% in the past four years, is the main reason for the decline.

The number of active loan accounts also fell during this period. However, the total loan amount disbursed has grown 34% to Rs 22,550 crore in FY19 from Rs 16,800 crore in FY16, indicating that banks are keen only on funding higher-sized loans.

While the total number of active education loan accounts in India fell from 34 lakh to 27.8 lakh in the past four years, the value of an average loan increased from Rs 5.3 lakh to Rs 9 lakh during the same period.

“Banks are looking at a value game. They are no longer interested in volumes,” said Parijat Garg, SVP, credit bureau CRIF Highmark.

Banks, other than PSUs, have largely downed shutters for students seeking loans below Rs 4 lakh without collateral. “Banks have gradually shifted from lending to poorer students or those they consider a risk in their ability to land a job or parents unable to put

up collateral. Most private banks have a tie-up with elite educational institutions and they lend only to their students. Public sector banks have red tape, documentation and formalities before they give Rs 4 lakh loans without collateral. It’s a dismal scene for less-privileged students,” says the CEO of a private bank.

Banks said they continue to lend, but not at the earlier pace. “We meet our prioritysector lending targets, which include education loans. But the rate of defaults makes us pause — we’re using data analytics and forensics for prudent lending,” says Mrutyunjay Mahapatra, MD, Syndicate Bank.

Since most banks are public-listed entities, they say they’re answerable to shareholders and have to curtail their losses. At Corporation Bank, NPA levels in 2018 are about 11% (Rs 177 crore in NPA of Rs 1,640 crore education loan disbursed). In terms of students lent to, the default rate is higher at 17.5%. Of 50,144 students who took loans, 8,777 defaulted.

The NPA levels were 8% for Corporation Bank five years ago, and the steady increase in defaults makes it more difficult to justify lending. “We’re facing the highest defaults in the sub-Rs 4 lakh segment. Higher-ticket size loans of between Rs 7-10 lakh normally have a lower rate of default,” said V Bharathi, MD, Corporation Bank.

RBI data of 2018 shows more than 91% of education loans being given to students are by public-sector entities. Analysts say there’s good reason for less participation from private banks. “The default rate in education loans is the highest in the retail segment; home loan default rates are between 0.5-1%, for two-wheelers around 2-3% and for commercial vehicle loans 3-4%. The risk-reward for bank being small ticket-size loans and prone to default doesn’t justify expansion in this segment,” says Alpesh Mehta, banking analyst, Motilal Oswal. Bankers blame the economic downturn, poor job market and excessive privatisation of education for this situation.

“There are hundreds of private colleges, engineering and arts churning out masses of students with mediocre or average skills in a tough job market. It is a supply-demand mismatch in the education job market. I don’t see the situation easing when it comes to education loans,” says N Kamakodi, CEO, City Union Bank.

[edit] 2018: 9% PSB loans turned bad

9% PSB edu loans turned bad in FY18, January 5, 2019: The Times of India


Nearly 9% of the education loans extended by public sector banks were categorised as NPAs in the last financial year, according to the government.

“According to information provided by the Indian Banks’ Association (IBA), NPAs of PSBs increased from 7.2% as on March 31, 2016 to 8.9% as on March 31, 2018,” minister of state for finance Shiv Pratap Shukla said in a written reply to the Lok Sabha. He was replying to a question whether NPAs in education sector rose to 9% during the two years period (2016-18). As of March 31, 2015, the bad loans in the education sector stood at 5.7%, the minister said.

[edit] Loans: Home Loans

[edit] Home loan closure checklist

The Times of India, Apr 18 2016

Home loan closure checklist

1 Refer to the `list of documents to submit' when making the application for a loan, and make sure that all the original documents are recovered.

2 Ensure that the documents are complete and received in good condition, in the pre sense of a bank official, before signing the acknowledgement.

3 Take an NOC from the lender, specifying the address of the property against which the loan was taken, name of the borrower and the loan account number.

4 Request the lender to inform CIBIL re garding the closure of the loan account.

The process should take about 30 days from the date of loan closure.

5 Ensure that any lien is removed after the clo sure of the loan. An existing lien will create problems during the sale of the property.

[edit] Home loan growth slows, affordable segment rises

Prabhakar Sinha,`Home loan growth slows, but affordable segment bright spot', Jun 21 2017: The Times of India

Even as housing credit growth moderated to 16% in 2016-17 as against 19% in 2015-16, the affordable housing segment holds promise, according to rating agency ICRA report.

The report said that lowering of interest rates and various government initiatives -Prime Minister Awas Yojana (PMAY), according infrastructure status, to boost affordable housing will increase the demand for the segment, which may see credit growth of up to 30%. As against an overall growth of 16% in the housing loan sector, total disbursal of credit in the affordable segment grew at 28% to Rs 1.2 lakh crore in 2016-17.

Despite moderation, the 16% credit growth in housing loan sector is still a bright spot in the economy if one sees it in the backdrop of growth in the non-food credit of entire banking sector which is languishing at 8.7% in 2016-17 as against 10.9% in 2015-16.

“While the slowdown was across both HFCs and banks, the decline in the pace of growth of banks was higher ­ declining from 19% in 2015-16 to 16% in 2016-17 -largely because they were operationally tied up in second half of 2016-17 on account of demonetization,“ according to the report. Housing finance companies' (HFCs) loan portfolio also dipped to 18% in 2016-17 from 19% in the previous year.

[edit] 2014>18: Self-employed segment grows; so do their defaults

April 9, 2018: The Times of India

The home Loan Mix, 2014>18
From: April 9, 2018: The Times of India

Segment Accounts For 30%, But NPAs Hit 1.1% Of Industry

A subdued loan demand from businesses is increasing competition in home loans, leading to a rise in the number of self-employed individuals getting mortgages. Home loans to self-employed accounted for 30% of mortgages in fiscal 2017-18 as against 20% earlier. But the flip side is that delinquencies are also rising.

Gross non-performing assets (NPAs) in the segment are estimated to have inched up by 40 basis points (100bps = 1 percentage point) to around 1.1% by the end of fiscal 2018, compared with about 0.7% a few years back. According to a report by ratings agency Crisil, home loans to the self-employed segment have been growing at a compounded annual growth rate of 33% in the past four years compared to overall 20% expansion in housing finance. Outstanding home loans in this segment are expected to have topped Rs 2 lakh crore by the end of fiscal 2018.

What has been driving growth is the entry of a host of new housing finance companies (HFCs), which have been growing aggressively in this segment. Also, larger HFCs are pushing into the self-employed segment as banks ratchet up presence in retail following weak credit demand from corporates and asset quality pressures, Crisil said in the report.

Crisil Ratings senior director Krishnan Sitaraman said, “Several initiatives of both the government and the regulator in the recent past have led to fast growth in home loans taken by the self-employed. We expect such mortgages to continue showing good growth because of the sharp focus of smaller HFCs and increasing interest of the larger ones.” Crisil Ratings director Rama Patel said, “The two-year lagged NPAs in the self-employed segment, at around 1.8%, is much higher compared with about 0.6% in the salaried segment, where the portfolio quality has remained largely stable over the years.”

[edit] Jan 2018/ Home loans up to ₹2L witness highest NPAs

Allirajan M , Affordable housing: Loans up to ₹2L see highest NPAs, January 12, 2018: The Times of India

Non-Performing Assets, PSBs and HFCs, 2015-16, 2016-17, year-wise
From: Allirajan M , Affordable housing: Loans up to ₹2L see highest NPAs, January 12, 2018: The Times of India

With a sharp rise in loan disbursements and number of beneficiaries in the affordable housing segment, loans of up to ₹2 lakh has ended up with the highest level of non-performing assets (NPAs) in home loans. Public sector banks reported higher NPAs in the sub-Rs 2 lakh housing loans slab than housing finance companies in 2016-17 and 2015-16, according to an RBI report on ‘Affordable Housing’.

NPAs for housing loans of up to ₹2 lakh stood at a whopping 11.9% for PSBs during 2016-17. Housing finance companies also saw a sharp surge in housing loan NPAs in this slab. NPAs went up from 6.1% to 8.6% for the sub-₹2 lakh slab between 2015-16 and 2016-17. NPAs stood at 10.4% for this slab. The overall NPAs for housing loans stood at 1.5% and 0.6% respectively for PSBs and housing finance companies during 2016-17. The government’s recent thrust on affordable housing through policy measures that include incentive schemes, accordance of infrastructure tag, interest subsidy scheme under PMAY (Pradhan Mantri Awas Yojana) have resulted in sharp rise in new housing projects in the affordable segment for low income groups. New unit launches in the affordable housing segment registered a 10.1% y-o-y growth in 2016-17. Affordable housing was the only segment in the residential real estate sector that saw a double digit growth. New launches in the mid-range and high-end segments fell by 11.7% y-o-y and 26.7% respectively in 2016-17.

There has been a more than three-fold increase in the number of houses completed under PMAY between April-December 2017. Investments to the tune of ₹1.72 lakh have been made under PMAY projects for constructing nearly 32 lakh houses.

[edit] Loans: Personal loans

[edit] 2018: Loans against property up 33%, defaults cross 3%

Mayur Shetty, Loans against property up 33%, but defaults cross 3%, December 20, 2018: The Times of India


Loans against property (LAP), which is the fastest growing segment in personal loans in calendar year (CY) 2018 across banks and finance companies, has also recorded the biggest increase in delinquencies, according to an analysis of borrower data by TransUnion (TU) Cibil.

Delinquencies are defined as loans with overdues of more than 90 days.

LAP, which constitutes 1.6 million total accounts, saw a more pronounced delinquency rate as compared to other businesses (see graphic). Defaults rose 73 basis points (100bps = 1 percentage point) year-over-year to 3.03% in the quarter ended September 2018.

“Lenders must judiciously monitor their risk-management processes. LAP has risen at a rapid rate. At the same time, delinquency rates for these loans have now crossed 3% for the first time in several years. Lenders must now determine if the rapid demand for these loans, which are an excellent generator of revenue, outweighs the recent delinquency increases,” said TU Cibil vicepresident (research & consulting) Yogendra Singh.

The TU Cibil report includes loan data from all lenders including banks, non-banking finance companies and housing finance companies. Nonbank lenders have been driving growth in the LAP business. “The difficulties faced by non-banks were October onward and fresh origination of loans would have slowed down in the October-December 2018 quarter,” said Singh.

Credit card accounts increased by nearly 32% to 3.69 crore by Q3CY18, while personal loan accounts rose 26% to 1.5 crore in the same period. Indian LAP borrowers held average balances of Rs 34.93 lakh in Q3CY18. Comparatively, the average personal loans size per borrower was Rs 2.52 lakh. In credit cards, the average balance per holder was Rs 46,000.

[edit] Loans: Policy repo rate

[edit] 2014-17

Rate cuts, 2014-17
Following the [August 2017] announcement, the policy repo rate -the rate at which RBI lends to banks -stands reduced to 6.0% from 6.25%, the lowest since November 2010. Consequently , the reverse repo rate -the rate at which RBI borrows from banks -stands adjusted to 5.75%
From The Times of India

See graphic:

Rate cuts, 2014-17

[edit] 2018: 25-basis-point increase to 6.25%

1st rate hike in Modi govt’s 4 yrs could make home loans dearer, June 7, 2018: The Times of India

Fear Of Inflation Drives RBI Move

Prompted by inflation fears and emboldened by growth, Urjit Patel on Wednesday delivered his first rate hike since taking over as Reserve Bank of India governor in September 2016. It’s also a first during Narendra Modi’s four-year tenure as PM.

While economic growth makes every government happy, it dreads sharp price rises, especially ahead of elections. The Modi government will be praying for a good monsoon because it’ll help spur growth and check inflation.

All six members of the RBI’s monetary policy committee (MPC) voted in favour of a 25-basis-point (100bps=1 percentage point) hike in the policy rate, taking it to 6.25%. It could lead to another round of marginal increases in home loan rates in the coming months; all major banks have in the last one week raised lending rates by 10bps.

Wednesday’s hike follows five rate cuts during Raghuram Rajan’s time as governor – 4 of 25 bps each and one of 50 bps – and two, both of 25bps, by Patel, the last in August 2017.


Eco activity has shown sustained revival, says RBI

RBI governor Urjit Patel has maintained the RBI’s stance at neutral, which means that the central bank could go either way in the next policy in August.

Patel said RBI's decision was driven by its inflationtargeting mandate. The last rate hike – for 50 bps, to 8% – was by Rajan in January 2014.

In its statement, the RBI said that domestic economic activity has exhibited sustained revival in recent quarters and the output gap has almost closed. “Investment activity, in particular, is recovering well and could receive a further boost from swift resolution of distressed sectors of the economy under the Insolvency and Bankruptcy Code,” it added.

What has tempered the positive sentiment created by sharper growth – the Central Statistical Organisation last week announced a healthy 7.7% economic expansion for January-March – is the spectre of inflation. Data released since RBI’s April policy showed inflation jumped to 4.58% in that month from 4.28% in March. It is showing signs of firming up further with crude oil prices rising more than 10%. The rupee has also come under pressure with the US dollar gaining against most emerging market currencies.

According to Bank of India MD & CEO Dinabandhu Mohapatra, the fact that the RBI has revised its consumer price inflation forecast upward to 4.8-4.9% for the first half of FY19 shows that it will keep a hawk eye on retail prices in the months ahead. While a rate hike will lower the value of banks’ bond portfolios, the RBI has provided lenders some relief by allowing them to spread losses over four quarters. Also, medium and small enterprises have been given some relief in loan repayment. And the RBI’s decision recognizing banks' government bond holdings for meeting liquidity coverage norms will leave banks with more funds for lending, which is expected to keep rates under check.

The RBI’s rate hike may have surprised some analysts, but the growth forecast of 7.5% for FY19 boosted market sentiment with the sensex closing 276 points higher. Yes Bank MD & CEO Rana Kapoor said, “While the rate action is primarily in response to global uncertainty, especially from crude oil prices, it also signifies that the central bank is comfortable on the improving growth outlook.”

CARE’s chief economist Madan Sabnavis said, “The upside risk to the inflation emanates from the rising crude oil prices globally along with minimum support price impact.” He said the pace of inflation would depend on the progress and spread of monsoon.

“We expect one more interest rate hike by at least 25bps during the calendar year 2018, whereas we cannot rule out the possibility of two rate hikes by the end of the financial year 2018-19,” said Sabnavis.

“Investment activity, in particular, is recovering well and could receive a further boost from swift resolution of distressed sectors of the economy under the Insolvency and Bankruptcy Code,” RBI said in its statement

[edit] 2018, Jan-Sept, vis-à-vis US Fed, BoE

2018, January-April: RBI’s key policy rates, vis-à-vis those set by the US Fed and BoE
From: October 6, 2018: The Times of India
2018, May-September: RBI’s key policy rates, vis-à-vis those set by the US Fed and BoE
From: October 6, 2018: The Times of India

See graphics:

2018, January-April: RBI’s key policy rates, vis-à-vis those set by the US Fed and BoE

2018, May-September- RBI’s key policy rates, vis-à-vis those set by the US Fed and BoE

[edit] 2017 Aug- 2019 Feb

Mayur Shetty, Das debuts as RBI guv with surprise rate cut, February 8, 2019: The Times of India


6-Member Panel Voted 4-2 For 25bps Reduction

Unveiling his maiden monetary policy on Thursday, RBI governor Shaktikanta Das announced a quarter percentage point (25 basis points) rate cut, citing lowerthan-expected inflation. It was the first rate cut in 18 months and came after two rate increases in the interim period.

The decision to reduce rates was a split one. Of the sixmember Monetary Policy

Committee, four, including Das and RBI ED Michael Patra, voted in favour while deputy governor Viral Acharya and external member Chetan Ghate voted against cutting rates. However, a change in policy stance from “calibrated tightening” to “neutral” was approved unanimously.

Asked whether banks would cut rates in response, Das said he would be meeting bank chiefs within the next fortnight and raise the issue of monetary policy transmission.


It was vital to act decisively, says RBI guv

The RBI governor on Thursday triggered concerns of back-tracking on the central bank’s move to peg retail loans to an external benchmark from April 2019, by referring to RBI’s earlier circular as a discussion paper. A clarification from the central bank is awaited.

Das also made it easier for banks to lend to top-rated finance companies. He also indicated that an interim dividend to the government was forthcoming.

Explaining the rationale for the rate cut, Das said it was “vital to act decisively and in a timely manner to address the objective of growth once price stability as defined (in RBI's inflation-targeting mandate) is achieved.”

Following the policy, the repo rate stands reduced to 6.25% from 6.5%. According to Acharya, the outlook for prices had changed in December itself following a crash in oil prices, but the central bank did not change the stance, choosing to move in small steps.

The RBI has forecast GDP growth of 7.4% for FY20 with the first half growth expected to be in the range of 7.2-7.4% and 7.5% in the third quarter. RBI has also forecast a CPI inflation path of 2.8% for Q4 of FY19 followed by 3.2-3.4% in the first half of FY20 and 3.9% in the third quarter of the next fiscal.

[edit] 2019, June

Repo rate lowest since 2010 after RBI’s third cut this year, June 7, 2019: The Times of India

RBI's Repo Rate (% per annum, April 27, 2001- June 6, 2019)
From: Repo rate lowest since 2010 after RBI’s third cut this year, June 7, 2019: The Times of India


Seeks To Make Loans Cheaper To Boost Eco

In a move that should make mortgages, auto loans and other borrowings cheaper, the Reserve Bank of India cut interest rates by 25 basis points for the third time this year and hinted at more cuts by changing its policy stance from “neutral” to “accommodative”.

Emboldened by benign inflation and availability of buffer foodgrain stock, the central bank’s monetary policy committee (MPC) voted unanimously to bring down the repo rate from 6% to 5.75% — the lowest since September 2010. Repo rate is the price commercial banks pay to the RBI for short-term funds.

Announcing the MPC decision, RBI governor Shaktikanta Das said, “Growth impulses had weakened significantly. A sharp slowdown in investment activity, along with a continuing moderation in private consumption growth, is a matter of concern.” He added that the fact that the bank’s stance was changed to accommodative meant that rate hikes were off the table for now. Responding to comments that the earlier two rate cuts were not passed on, Das said banks have passed on 21 basis points through a reduction in lending rate. “In the past the transmission took about four to six months. But this time, it has happened in two to three months’ time. Going forward we expect faster and higher transmission by banks,” he said.

A third reason for the rate cut was the return of the Narendra Modi-led NDA government in the polls last month, which has firmed up hopes of fiscal responsibility.

Following the rate cut, the bond and the forex markets reacted positively. The yield on the 10-year benchmark government bond yield fell to 6.8%, compared with Tuesday’s close of 7%. The rupee, which had weakened to 69.36 against the dollar ahead of the RBI decision, strengthened to 69.28 in afternoon trade.


Sustainable biz to get capital: RBI

They (RBI) have made it amply clear to corporates and business that capital will be made available for the right sustainable businesses at competitive costs. It is truly a coincidence that the central banks of the world’s two largest democracies are well-aligned to fuel growth and help create jobs in their respective economies. We continue to expect the RBI to cut another 50bps by March 2020 in the backdrop of the Fed’s likely cut of 75bps,” said Kaku Nakhate, president and India country head, Bank of America.

“On the fiscal front, the governor mentioned that the government has broadly followed the fiscal glide path and is likely to stay fiscally prudent. This essentially means that unless there is a significant change in the fiscal deficit numbers for FY20 (compared to the interim budget), there could be room for the RBI to support growth through further interest rate cuts,” said Abheek Barua, chief economist, HDFC Bank.

“While the rate transmissions so far by the banks have only been modest in relation to the rate cuts announced, a pick-up in the pace of the monetary transmission would be one of the key drivers in supporting the growth estimates for the current year,” said Naresh Takkar, MD & group CEO, ICRA.

[edit] The pressure behind RBI's rate cut hat-trick

June 7, 2019: The Times of India


The Reserve Bank of India announced a 25 basis points (0.25%) cut in repo rate (the rate at which it lends to banks), the third rate cut in a row. The repo rate now stands at 5.75%, the lowest since July 2010. The central bank also revised its GDP growth expectations for 2019-20 downwards from 7.2% earlier to 7% now.

It's the economy: The latest rate cut comes at a time when the economy grew at its slowest in over four years. Among the challenges the economy faces, RBI says, are: Cash crunch in the system due to lower government spending (liquidity turned into a surplus only this month after remaining in deficit in April and May), a weak global demand due to trade wars that's hurting exports and investment activity and a weakening of private consumption, especially in rural areas. Plus, India's foodgrains production has dipped, growth in manufacturing activity has weakened, automobile sales have fallen, cement production and steel consumption (key indicators of construction activity) have slowed down.

Challenges ahead: The central bank notes that growth impulses of the economy have weakened significantly and a sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern. Hence, it wants to support efforts to boost demand and reinvigorate private investment activity. Experts say that by changing its stance from 'neutral' to 'accommodative', RBI has communicated that the growth slowdown is real.

Will you gain? Though consecutive rate cuts by RBI signal a drop in cost of funds for corporates and individual borrowers, banks haven’t passed on the benefits to their customers. Bankers say it is not possible to bring down their cost of funds without reducing deposit rates and bringing them down has been difficult as deposits have grown slower than loans. In 2018-19, bank deposit growth was 10% compared to 13% growth in loans. However, things may change this time as the RBI says that liquidity in the system has turned into a surplus for the first time in at least two months. If the surplus in the banking system continues for some time, lending rates are likely to come down.

Go cashless: The central bank has also decided to do away with the charge it levies on banks for RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer) transactions. If banks pass on the benefits to their customers (they used to pass on RBI's charges), online money transfers could become virtually free.

[edit] Loan/ debt resolution

[edit] The NDTV case

Mayur Shetty | NDTV probe: Pvt banks fear debt resolution may be hit |Jun 07 2017 | The Times of India (Delhi)


Terming Any Loan Settlement As Criminal Raises Concerns

Private sector bankers say that if NDTV's loan settlement with ICICI Bank is termed criminal, it could hit resolution of bad debts. The concerns follow the Central Bureau of Investigation (CBI) alleging that ICICI Bank officials may have caused wrongful gains to NDTV promoters by agreeing to cut the interest rate to settle the loan.

“Settlement of any stressed loan involves some sacrifice by the banker. Often this is done to protect the loan amount since stand-off might result in loss of the principal well,“ said a banker who didn't want to be identified. If this sacrifice were to be construed as wrongful loss to the bank and a gain to the borrower, loan resolutions would not be possible, he added.

Multinational banks in India have been able to clean up their balance sheet the fastest as they have taken large haircuts in loans that were in default. The government is pushing for settlement of close to Rs 4 lakh crore of bad debt owed by top 50 borrowers which account for over 40% of the banking sector's bad loans.

Banks are likely to make a representation to the government and the RBI through the Indian Banks Association on commercial decisions being questioned. This is the second instance of CBI action against a commercial decision, the first being the arrest of senior officials of IDBI Bank on charges of improper loan sanctioning to Kingfisher Airlines.

The CBI, in a statement on Tuesday , said that the investigation did not pertain to loan default but to the interest relief. “ICICI Bank took the entire shareholding of the promoters in NDTV (nearly 61%) as collateral and then accepted prepayment of the loan by reducing the interest rate from 19% p.a. to nearly 9.5 % p.a. and as a consequence thereof, causing a wrongful loss of Rs 48 crore to ICICI Bank and a corresponding wrongful gain to the promoters of NDTV ,“ the agency said.

In May 2017, the government passed an ordinance authorising the RBI to issue directions to banks to initiate insolvency resolution process under the provisions of Insolvency and Bankruptcy Code (IBC), 2016. This new legislation was aimed at breaking the logjam in the banking industry over banks' inability to resolve over Rs 7 lakh crore of bad loans.

A key feature of this legislation was creation of oversight committees to ratify decision taken by bankers. Having a panel in place is expected to shield bankers from action by investigating agencies who may later look into loan recasts.

However, the government has said that there will not be any blanket protection for bankers. Also proposals have to be referred to the oversight panels by banks.

[edit] See also

And the list is growing…

The Reserve Bank of India

Bank of Baroda

Bank of India

Bank robberies: India

Banking and the law: India

Banking, India: II (government data)

Banking, India: I

Banking, India: Loans

Banks in India

Indian Bank

Indian money in foreign banks

Industries: India (ministry data)

Investments: India

Non-banking finance companies: India

Punjab National Bank

World Bank and South Asia

Raghuram Rajan

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