Stressed assets: Rs 7,700-cr worth property up for sale

  BL :Mumbai/Ahmedabad,Jan 1,2014

More auctions by banks, financial institutions likely to recover dues

An estimated Rs 7,700 crore worth commercial and residential properties with banks and financial institutions are up for sale. 

There are around 2,200 units in the commercial category and nearly 11,000 units in the residential segment, said D. K. Jain, Chairman and Managing Director of Atishya Technologies Ltd,  here on Tuesday.

Maharashtra has taken the lead, largely due to Mumbai, in terms of having commercial non-performing assets worth Rs 842 crore, and non-performing assets in residential categories worth Rs 838 crore, according to data compiled by the portal.

Largest share

Total NPA properties worth around Rs 27,500 crore  spread across 27,626 units.

Commercial NPA properties have a 15 per cent share in value term, while residential properties have a 13 per cent share. The biggest chunk of NPA properties fall under the industrial land and building category, with over 65 per cent share in value terms.

Elaborating on the findings, Jain said, “After Maharashtra topping both the commercial and residential categories, comes Delhi, with Rs 686 crore worth of NPA commercial, and Rs 500 crore worth of NPA residential properties.”

Andhra Pradesh was at number three in the residential space, with Rs 497 crore worth of space to be auctioned by banks and financial institutions. Tamil Nadu, West Bengal and Uttar Pradesh were the next among States with the highest value of commercial and residential NPA properties, Jain added.

The single largest commercial property in value terms is an office property at New Delhi valued at Rs 200 crore at the base price. In the residential category, the largest property is a farmhouse in New Delhi, with a base value of Rs 40 crore.

Mumbai has two NPA commercial properties with a base price value of Rs 26.5 crore and Rs 24.6 crore, the study showed.

More in store

“As NPAs in the corporate sector continue to grow in the coming months, there will be more commercial and residential properties which will be put under the auction block by banks and financial institutions to recover their dues.

“A slowdown in the real estate markets across the country has further added to the woes of the lenders, who will not be able to generate higher returns from the sale of mortgaged properties in the residential and commercial spaces,” Jain added.

He noted that a positive turnaround in the realty market, as well as the Indian economy, may take place around May if a stable government is formed at the Centre.

As on March 31, 2013, net NPAs of 40 listed banks were Rs 93,109 crore, which rose to Rs 1,28,533 crore as on September 30, 2013.

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Maharashtra leads, largely due to Mumbai, in both commercial and residential NPA categories.

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RBI cracks whip on bank asset quality

R  Venkatakrishnan :BL ;January 1, 2014

Deteriorating asset quality in the banking system has prompted the Reserve Bank of 

India to publish a discussion paper, “Early Recognition of Financial Distress, Prompt 

Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalising 

Distressed Assets in the Economy”.

The paper has attempted to address both the proactive steps to prevent 

slippage in asset quality as well as reiterate some of the

 earlier guidelines that the regulator had issued.

Better Risk Management

For starters, the regulator has reinforced the importance of credit risk management. Banks have been asked to carry out independent and objective credit appraisal in all cases and not depend on credit appraisal reports prepared by outside consultants. They have been mandated to ascertain the source and quality of equity capital brought in by the promoters.

This primarily ensures that multiple leverages, especially in infrastructure projects, are eliminated.

 Banks have been required to verify the source of the equity capital in the subsidiaries/SPV to ensure that debt of the parent company is not infused as equity. Banks are now additionally required to verify if the names of any of the directors of the company appear in the list of defaulters/wilful defaulters. They also have to classify borrowers as “non-cooperative borrowers” — those who do not provide necessary information to assess financial health even after two reminders or deny access to securities or do not comply with the terms of the sanction.

The RBI proposes to create a database of directors on the boards of companies, classified as non-cooperative borrowers, for dissemination to lenders. Banks have asked not to rely on certification given by borrowers' auditors.

The central bank has also brought the advocates and asset valuers within the radar. While blacklisting of professionals by banks has always been in vogue, it has to be viewed in the context of the provisions under Section 447 of the new Companies Act 2013, which envisages class-action for abetment to fraud.

The proposed guidelines also envisage a higher degree of monitoring in respect of advances already made. Banks have now been mandated to create a new sub asset category “Special Mention Accounts (SMA)”. The concept of SMA is not new in the context of the Indian banks.

The regulator, as early as September 2002, had issued guidelines on preventing slippage of NPA accounts. SMAs find reference even in that document. SMA has now been further sub-categorised into SMA-NF, SMA-1 and SMA-2.

A loan can be potentially categorised as SMA-NF, if any one of the following, illustrative signals, are noticed — delay of 90 days or more in the submission of stock statements or other operating control statements including non-renewal of facilities based on audited financials; actual sales/operating profits falling short of projections, for loan sanction, by 40 per cent or more; non-cooperation for conduct of stock audits or reduction of drawing power by 20 per cent or more after stock audit or evidence of diversion of funds; return of three or more cheques or electronic debit instructions in the last 30 days on account of non-availability of funds; return of three or more bills/cheques sent on collection by the borrower; devolvement of letters of credit or invocation of bank guarantees and its non-payment within 15 days; increase in frequency of overdrafts in current accounts and borrower himself reporting stress in business and financials.

SMA-1 represents a category where the principal or interest payment is overdue between 31 and 60 days, and SMA-2 where principal or interest payment is overdue between 61 and 90 days.

The existing guidelines provide for assets to be categorised as NPAs, where principal and/or interest are not paid for 90 days or more. The RBI proposes to set up a Central Repository of Information on Large Credits (CRILC) that will collect, store and disseminate credit data by the banks.

Additionally, important non-banking financial companies are also required to submit data. Banks will be required to submit credit information to CRILC on borrowers having aggregate fund-based and non-fund-based exposure of Rs 5 crore and above.

Banks will also have to furnish details of all current accounts of their customers with outstanding balances, both debit and credit, of Rs 1 crore and above.

Banks will be required to submit SMA status of the borrowers to CRILC. If an account is categorised as an SMA-2 at any time or SMA-1 for any two quarters or SMA-NF for three quarters in a year, then the bank would be required to initiate the corrective action plan. Corrective Action

The implementation of the action plan is also proposed to be monitored closely. Failure to turn around stressed assets would warrant initiation of other recovery mechanisms.

The document envisages a positive reconstructive role for asset reconstruction companies/private equity funds. The proposals are in the right direction and the challenge lies in their implementation.

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The RBI’s initiatives to prevent slippage in asset quality 

of banks are welcome.

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(The author is a chartered accountant.)

In 2014, Supreme Court will witness three CJIs

The year 2013 saw the Supreme Court giving its nod for the commissioning of the Kudankulam nuclear plant in Tamil 

Nadu. File photo: Shanker Chakravarty

J Venkatesan :The Hindu :Newdelhi :1 Jan 2014

The Supreme Court will confront several challenges in 2014.

 It will witness three Chief Justices in office and the retirement of 10 judges.

The present Chief Justice, P. Sathasivam, will retire on April 26; Justice R.M. Lodha will take over from him the next day. But he will have a short tenure of five months till retirement in September, when Justice H.L. Dattu will succeed him.

These three CJIs will have a daunting task of filling 12 vacancies, including two existing vacancies and 10 which will arise later (with the retirement of two CJIs.), if the National Judicial Appointments Commission is not put in place by then. Furthermore, the will have to ensure that 275 judge vacancies in High Courts are filled. The immediate task for the Supreme Court is to decide the review petitions on homosexuality. Its December 11, 2013 judgment declaring illegal homosexuality and gay sex between two consenting adults created a furore among the gay community, and various sections have faulted it.

Next, the court will have to decide on the Presidential Reference for removal of Justice A.K. Ganguly as Chairperson of the West Bengal Human Rights Commission.

Besides deciding on the CBI’s autonomy and freeing it from ‘political control,’ the court will take the probe into the coal block allocation scam to its logical end. It will pronounce an important verdict in the Mullaperiyar dam row between Tamil Nadu and Kerala and decide on validity of Aadhar card and the Wage Board notification for journalists and non-journalists.

The year 2013 saw the court giving its nod for the commissioning of the Kudankulam nuclear plant in Tamil Nadu.

Giving a big relief to political parties, the court held that freebies offered by them in their manifestos would not amount to “corrupt practices” and “electoral offences” under the Representation of the People Act. But it directed the Election Commission to frame guidelines in consultation with all recognised parties.

To prevent acid attacks, the court prohibited “over-the-counter” sale unless the seller maintains a log to record details of the person to whom acid is sold, the quantity and the address of the buyer. It also directed the States to pay a compensation of Rs. 3 lakh to acid attack victims.

The court declared unconstitutional the single National Eligibility-cum-Entrance Test (NEET) introduced by the Medical Council of India and the Dental Council of India for admission to graduate and postgraduate medical and dental courses. It quashed the Karnataka government’s order removing G. Bhavani Singh as special public prosecutor (SPP) for conducting the trial in the disproportionate assets cases against Tamil Nadu Chief Minister Jayalalithaa and three other accused.

The court ordered a CBI probe into 14 issues relating to criminal dimensions of the conversations of corporate lobbyist Niira Radia with industrialists and others.

The court was harsh on the Sahara Group when it failed to repay deposits to the tune of Rs.20,000 crore. It directed Sahara to deposit original title deeds of its property worth Rs. 20,000 crore with the Securities and Exchange Board of India. It ordered compulsory registration of the First Information Report by the police on receipt of a complaint if the information disclosed commission of a cognizable offence. No preliminary inquiry was permissible in such a situation.

The court directed the Centre and the States to restrict the list of VIPs using the red beacon in their cars and to limit the facility to the heads of political executive, the legislature, the judiciary and persons holding constitutional posts.

Happy New Year 2014 Greetings

Happy New Year  2014 Greetings

Deccan Chronicle :Police start probe in disrupted DCHL property auction

BS Reporter  |  Hyderabad  

December 27, 2013 Last Updated at 00:50 IST

Case registered against Indiabulls' official for an alleged false promise of lower price to a bidder

The city police on Thursday said they had begun a probe into the alleged disruption of a Deccan Chronicle Holdings Limited (DCHL) property auction at the office of Indiabulls Housing Finance here on Tuesday.  They would also look into a complaint filed by a prospective bidder in a related matter against two officials of Indiabulls.

The  police registered a case against Somajiguda municipal councillor A Mahesh Yadav and eight others for disrupting the auction of the residential property of P K Iyer, a promoter of DCHL, based on a complaint by Indiabulls’ legal manager K V Subbayya.

They also registered a case against Subbayya and his colleague based on a complaint by Chalapathi, who, according to police, alleged the duo had cheated him after taking money to help get the property at a cheaper price.

West Zone DCP V Satyanarayana said they had initiated the investigation and added they needed to question Indiabulls’ top officials to get a clear picture.

“We readily provided adequate police security to the Indiabulls’ team when they went to take possession of the said property in July this year. I do not understand why they did not seek similar protection this time,” he told Business Standard on Thursday.

The police are not only looking into the motive behind the alleged action of Mahesh Yadav but also trying to find if there was any link between him and Chalapathi, who had approached the police against Indiabulls’ officers soon after the company representatives filed a complaint against the corporator .

According to Satyanarayana, the complainant alleged Subbayya and his colleague received Rs 5 lakh as an advance to help him get the property at a cheaper price but later betrayed him by enhancing the reserve price to Rs 14 crore from the earlier figure of Rs 6 crore. Subbayya refused to comment on the issue.

Indiabulls took possession of two residential properties, including this one, of DCHL promoters after invoking the Sarfaesi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) when they failed to repay the Rs 100 crore it lent.  

An attempt to seek relief under the sick companies Act by the DCHL promoters has failed, as the Board for Industrial and Financial Reconstruction (BIFR) declined to register the company as sick one.

“Although the company is in the business of newspaper, it had filed the reference showing its business to be that of printing which was completely misleading and factually incorrect,” an order issued by the BIFR registrar said.

Referring to a host of civil and criminal proceedings being pursued against the company promoters, the registrar, in his orders, also questioned the claim of the DCHL that Sarfaesi action has been taken only to the tune of 9.78 per cent of its securities.

“A large number of secured creditors, including Indiabulls, Canara Bank, Kotak Mahindra, JM Financial, IDFC, SBI among others have initiated a similar action much more than what has been stated by the company,” it said.

India should cut debt in 5-6 years: Montek T

Press Trust of India  |  Chennai  

December 26, 2013 Last Updated at 20:09 IS

Planning Commission Deputy Chairman says 

that for this to happen, revenues must go up 

and there should be decrease in subsidies

India should reduce its debt within 5-6 years by putting fiscal policy on the right path, but "draconian changes" are not the answer, Planning Commission Deputy Chairman Montek Singh Ahluwalia today said.

 

"In the next five or six years, the objective should be to bring the gross debt to GDP ratio down that means fiscal deficit also must go down," he said, adding for this revenues must go up and there should be decrease in subsidies.

 

"Draconian changes are not at all the answer. A very large number of balls have to be balanced in an effort to put fiscal policy in right path", he said, delivering the first Dr Raja J Chelliah lecture organised by Madras School of Economics and Southern India Chamber of Commerce and Industry.

 

 Noting that a fiscal policy must be directed towards higher level of economic efficiency, he said: "Fiscal policy must be designed to promote growth. (It is) particularly important for a low income countries like us. In our case, trying to design fiscal policy, we need to look what is the implication of fiscal policy and the growth of an economy."

 

Stating that fiscal policy was about making sure that different groups get a fare share of opportunities, he said: "India being a Federal structure, distribution is not just an individual's context, but it is also a distribution of revenues between the Centre and States, States to lower level bodies and others".

 

One of the objectives of fiscal policy was to stabilise the economy on how to react to "shocks" (whenever a slowdown occurs) both external and internal, he said.

 

Later talking to reporters, Ahluwalia said inflation was a problem but added 2014 would be a better year.

 

"Inflation is a problem. We will see a softening of inflation. If you look at the data, it suggests that there will be softening of inflation. I cannot judge how quickly it will often, but it will soften," he said.

 

On Tamil Nadu Chief Minister J Jayalalithaa's charge that the Centre was not allocating more funds to Tamil Nadu, he said, "I would not comment on state issues. She has not written to me on this matter."

 

On the Goods and Services Tax, he said "Most of the parties, I think, are coming closer. So, obviously it requires a Constitutional amendment. It will require going to the next Government (for passage)".

 

"I can assure you that if you are able to say that GST is now a reality, it will be the best signal globally that India is open for business and serious about it," he said.  

CDR references drop sharply in December

Abhijit Lele  |  Mumbai  

December 27, 2013 Last Updated at 00:50 IST

Bankers, however, say it will be premature to celebrate

Did Santa Claus bring good news to bankers who have been burning mid-night oil to restructure debt of stressed companies?

The closing month of calendar year 2013 (December) saw dip activity at the Corporate Debt Restructuring (CDR) cell, with just four cases involving aggregate debt of about Rs 4,500 crore being referred for recast. In the month of November, the CDR forum received just three cases with aggregate debt of Rs 4,000 crore.

Top bankers including those at the CDR cell while showing “signs of relief” are prompt to caution that it is premature to open champagne bottles. There is enough stress in the system due to long-drawn slowdown and burden of interest costs on companies.

"Normally, there is a last minute rush to refer cases at the end of each quarter. But this time around there was no such pressure on us," said a relaxed IDBI Bank executive.

Banks and corporates sent loans of more than Rs 28,700 crore involving 14 cases to the forum in October-December 2013, according to provisional data from CDR.

The large cases like ABG Shipyards and Gujarat NRE Coke referred in October swelled the tally. The infrastructure, textiles and iron and steel sector still lead the pack of stressed companies that are under debt recast.

A senior public sector official said many large groups, especially those in roads, power and other infrastructure segments are trying to sell assets and restructure operations. Perhaps this would relieve them from the need to come to banks for recast.

Dun and Bradstreet in its outlook for 2014 said maximum distress in debt was witnessed in the iron & steel sector and infrastructure sector. They have high share in stressed asset book (NPAs plus restructured loans) of public sector banks.

With continued deceleration in the industrial growth, pick-up in activity in infrastructure and iron & steel sector is expected to be delayed. Since concentration of distressed assets is higher in these sectors asset quality deterioration in Indian banks is set to worsen, it said.

Rating agency Icra has painted a similar picture about the stress levels of banks. In light of large debt recast under CDR, standard restructured advances are slated to grow from 5.3 per cent at end of March 2013 to 6-6.2 per cent by March 2014, it said.

Abizer Diwanji, National Leader - financial services at Ernst & Young India said life will be tough in 2014. Loans given in boom time have showing stress now when the economy is growing at slow pace.

The Reserve Bank of India has proposed more steps tighten rules for restructuring and non performing assets. They will have definite impact on the restructuring activity, he said.