Saturday, March 27, 2010
Wednesday, March 24, 2010
Debt Doctor guides borrowers on managing debt & renegotiations
Source:IST, Nikhil Menon, ET Bureau 17 Mar 2010, 0156 hrs
Sometime last year, a 34-year-old manager at a multinational
company in Bangalore, was forced to borrow money for his
father’s treatment, which he did with the typical recklessness
of the new-economy consumer. “I already held a few credit cards and had dues on them but was
forced to take more loans. Eventually, I found that my installment
outgo exceeded my monthly salary!” the man who requested not to
be named in this story, recalls. And then began the constant
barrage of calls from collection agents.
“I was getting very upset, because the agents would call me
constantly and stand near my office and residence, waiting for me,”
he says. He tried calling the banks and negotiating with them,
but they were unresponsive. A sympathetic friend then told
him about Debt Doctor, a startup that does debt management
for financially distressed individuals.
“I was hesitant about approaching an outsider with my financial problems,”
he admits, adding, “But once I met the team, I became aware of my options.
The team not only advised me but also negotiated with banks on my behalf.”
Today, he has already paid off two of his six loans.
Two more are in the process of being closed and he is hopeful
that he would be debt-free soon.
This isn’t an uncommon story. The very concept of unsecured loans
has found takers in many Indians, who, like their Western counterparts,
are borrowing large sums of money to live in the present, paying little
heed to the consequences of such a dangerous lifestyle.
Ashwin Cannonkadu, a retail banking professional, who
has spent several years in the financial services industry,
including Merrill Lynch, was determined to do something about this.
Cannonkadu, founder and CEO of Debt Doctor Management Services,
which claims to be India’s first debt management company, says,
“I would often read about suicides due to harassment and
unethical practices followed by recovery agents.”
His team also conducted research into the non-performing
assets of various banks and financial institutions operating in
unsecured debt products (including personal loans, business loans,
consumer loans and credit cards).
“The alarming result was that the default rate was very high,” he says grimly.
Eventually, the central bank stepped in to contain defaults and
provided guidelines to banks to set up credit counselling centres.
This marked the first tentative steps of debt management in India
and Debt Doctor saw an entrepreneurial opportunity here.
The company started in September 2009, but has been
conducting ‘clinics’ or public workshops for some months
prior to that. Currently restricted to Bangalore, these clinics,
promoted through newspaper ads and email/SMS campaigns,
seek to highlight the importance of good financial management
and benefits of maintaining a good credit rating.
Borrowers can approach Debt Doctor for personalised
guidance into managing debt more efficiently through a series
of one-to-one interactions with a panel consisting of
financial experts, legal and psychological experts.
The client are advised on how to manage and consolidate
debt. If the client is unable to close the loan in the near future,
Debt Doctor even negotiates with bank officials for a better deal.
As a service provider, the company’s revenue model consists of
a fixed fee as well as a variable component, charged to the client.
Debt management is still nascent in India.
“Financial Institutions are currently not geared to
cater a third party intervening in the whole process
. Also, a third party is viewed by FIs as a deterrent,
as opposed to the value that they can bring,”
Cannonkadu says. Nevertheless, Debt Doctor
is on a growth path and hopes to expand into Chennai,
Mumbai, Hyderabad, Delhi and Kolkata in the next financial year.
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RC Agarwal , Chairman, Vishal Retail on restructuring and consolidation.
Source: IST, ET Now:23 Mar 2010, 1315 hrs
RC Agarwal , Chairman, Vishal Retail, spoke to ET Now
on restructuring and consolidation.
How business is shaping up? Are we indeed seeing a revival in footfalls as well as consumer spending? What has been the kind of same store sales growth for you so far?
We have been getting a sales growth of 30% to 40% since last three months, January, February and March and our per square feet sales growth is 30% to 40% and this is very good sign and going forward, it will increase.
In terms of your debt restructuring, how much of stake are you looking to sell to TPG as well as your secured lenders?
The next CDR Committee meeting will be held on 30th of March and banks are agreeing on all the terms and once that has been finalised, we will disclose the contour of that particular CDR plan.
Have you been able to successfully restructure it on terms such as lower interest rates with your creditors?
Yes, almost. They are doing whatever is necessary for the further operation of the company and banks have made a very good deal and it is very good for the company as well as the new investors coming in.
The worrying part would be the non-CDR lenders. The story is they have approached the debt recovery in tribunal to recover the money. How would you plan to resolve this issue if indeed this is an issue?
All these are rumours roaming around the world. I do not think anybody is against this CDR mechanism. Everybody is on board, most of them are lenders.
Are you not facing any hurdles as far as your non-CDR lenders are concerned?
Yes because this is good for everybody, lenders as well as the company and every lender understands this and they are agreeing on most of the terms.
In terms of a timeline, by when do you expect this entire CDR process to be completed?
It is on the verge of completion. It is just matter of time and some formalities which are being held.
What kind of targets have you set for your company for FY11? FY10 clearly has been the best of years but FY11, can we expect a bit of a turnaround?
We will announce our next plan after the CDR, how the CDR structure will be and which investor will come in. Then within two-three months, we will announce our future planning.
In which case, could you throw some light on your capex and expansion plans going forward?
First, we are going for consolidation, we have reduced our cost, sales are increasing and we have taken control of many things and going forward, company will be doing better in this financial year. We are having best stock turnover ratio in the retail industry right now. After the write off and everything, we are doing a stock turnover issue of only 60 days and that is the best in the country.
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Bank harassment driving SSI units to sickness
March 19, 2010 07:02 PM |
Source: Moneylife:Sucheta Dalal with Sanket Dhanorkar
Infinity Metals, an export-oriented SSI unit, has been
struggling to keep itself afloat after its bank
systematically abused the SARFAESI Act and harassed
it into near-bankruptcy. Denied justice by the ombudsman,
the troubled unit is now left gasping for breath.
At a time when small-scale industries (SSIs) are being given
‘priority treatment’, many units continue to be left at the mercy
of callous and grasping banks. One such unit, Infinite Metals,
is being systematically dismantled by its banker under the umbrella
of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest (SARFAESI) Act, and
despite its desperate cries for help,
regulators and authorities continue to turn a blind eye.
The Act empowers banks and financial institutions to
recover their non-performing assets (NPAs) without the
intervention of the Court, through various methods.
The case of Infinite Metals shows how SARFAESI’s
draconian powers are misused by banks against small
companies. Infinite Metals is a small-scale export-oriented unit
(EOU) which is facing a daily battle for survival as its lender,
Corporation Bank, is unfairly utilising the provisions of the
SARFAESI Act to force the otherwise healthy unit into sickness.
The Bank has been resorting to various strategies to recover its
claimed dues. The unit alleges that Corporation Bank
wrongfully classified its account as an NPA,
when there were no overdue amounts. Its accounts were
immediately frozen following this classification, which prevented
the unit from access to working capital.
It states that in order to justify the NPA classification,
the Bank has been cooking up the amounts and due dates in
various submissions to the Reserve Bank of India (RBI) and
the Banking Ombudsman (BO). The Bank apparently also failed
to give due notice of the account becoming an NPA before
enforcing the SARFAESI Act on the borrower.
The Bank also blatantly refused to make any efforts towards
restructuring the unit’s debt and helping it get back on its feet.
Following such harassment, Infinite Metals filed a complaint
with the BO to get justice and protection.
The BO, after a detailed investigation and written and oral
submission from both parties, finally concluded that there
was indeed a deficiency in service on the part of the
Bank on all points mentioned in the complaint.
However, a year later, the BO unceremoniously closed the
case on the grounds of lack of adequate documentary
evidence and failed to issue a decisive order.
Emboldened by this move, Corporation Bank promptly
stepped up its harassment and threatened to sell the unit’s
residential property under the SARFAESI Act.
The Bank finally succeeded in arm-twisting the unit into
selling its property, for which the unit had to pay a capital
gains tax. It has also lodged a recovery suit at the debt
recovery tribunal (DRT). This is despite the fact that the unit has
paid the Bank 100% of its principal dues.
Corporation Bank is now choking the unit into paying
up the inflated principal and outstanding interest.
Harish Bhatia, director of Infinite Metals, points out how the
Bank has refused to follow RBI guidelines.
“Corporation Bank has wrongfully invoked the SARFAESI
Act within three months of NPA classification.
It has not followed any RBI guidelines in this matter.
Despite accepting the fact that no dues were outstanding, the
Bank has gone ahead and invoked SARFAESI. Also,
when the credit facilities were guaranteed by
Export Credit Guarantee Corporation of India Ltd (ECGC),
what was the legal reason for the Bank to come on us so hard?
The BO’s decision to drop our case is simply baffling.
In my belief, it is a clear case of corruption and malafide intention on the part of the Bank.”
When contacted by Moneylife, an official from Corporation Bank claimed
that the Bank has followed RBI’s guidelines on the SARFAESI Act
and that it is yet to receive 100% of its dues. “Bank classification of NPA
is nothing to do with the ECGC’s claims. They have their own way
of settling things. It could have taken a long time for them to actually
conclude investigations and settle the claim.”
When asked why the Bank did not attempt to restructure
the unit’s debt, the official said, “The company should have initiated
a definite proposal for restructuring if it so wished.”
The BO’s failure in providing justice to the unit has now
left it at the mercy of the lender. Continued harassment at
the hands of the Bank will only drive the unit further into
financial losses, ultimately leading to its closure.
The unit’s appeal to the RBI against the BO’s decision
has been referred back to Corporation Bank. However,
no reply has been forthcoming from the Bank and hence,
the appeal is held up. In this scenario, the SSI unit now appears
to have nowhere to turn to. It certainly cannot expect to get
justice from the civil courts, where various cases have been pending for ages.
Ironically, an RBI survey itself points out that only 4% of sick
SSI units are viable. “Has anyone tried to check how many
of these sick units are a case of bank-induced sickness?
Are 96% of our SSI brethren such dumb entrepreneurs,” asks Harish Bhatia.
The fact is that many such small businesses are being
subjected to torture and harassment at the hands of bankers
with selfish interests. While it is very easy for bigger companies
to have their way with the banks and the judiciary, small
businesses with no clout always end up on the losing side.
Those who have got such sufferings can write to us :
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DRT Recovery inspector held for graft in Mumbai
Source:Express News Service : Mar 24, 2010 at 0028 hrs
MUMBAI: Acting on a tip-off , the CBI Anti Corruption Bureau
arrested Anil Gamre, an officer of the debt recovery tribunal,
on Tuesday afternoon for allegedly demanding
a bribe of Rs. 3,000 from the complainant for
returning his seized property.
According to ACB, the debt recovery tribunal had
auctioned the flat of the complainant acting on a
complaint by the Thane branch of the Bank of Maharashtra.
“However, despite making the payment, the panchnama
of the flat was not handed over to him by the recovery inspector.
When requested to do so, the inspector demanded a
bribe of Rs 3000 for the same,” said an officer.
Gamre was arrested while accepting the bribe.
Tuesday, March 23, 2010
Monday, March 22, 2010
Debt tribunal shadow on Vishal restructuring
Souce: Ruchika Chitravanshi / New Delhi March 22, 2010, 0:40 IST
A group of lenders to Vishal Retail, who are not part of
the ongoing corporate debt restructuring (CDR) exercise,
are taking other routes to recover their money.
One such bank,DBS, had approached the
Debt Recovery Tribunal (DRT), a senior
official in the bank confirmed.
The DRT hearing is scheduled on Monday. Vishal Retail
owes Rs 40 crore to DBS.
The bank is also believed to have sent a “winding up” notice
to the debt-ridden company. “We were not happy with the things
we were getting. For the non-CDR lenders, it was a raw deal.
We are basically doing whatever we can to recover our money,”
the senior official said.
The non-CDR lenders include Barclays, DBS, Deutsch Bank (MF) and
Life Insurance Corporation. Some of the other non-CDR banks, too,
are considering an approach to DRT to get a better deal and negotiate
the terms of repayment.
Vishal Retail had opted for CDR last November, with six banks
joining the process. The company has total debt of Rs 730 crore,
with non-CDR lenders accounting for Rs 260 crore.
On being asked, Vishal Retail Chairman Ram Chandra Agarwal said:
“While the CDR is going on, no other litigation will be valid.
Most banks are on board with us. If one or two aren’t,
then they eventually will be.”
According to financial analysts, however, the DRT procedure
can impact the CDR exercise. “The CDR might reconsider
the payment made to the non-CDR banks to find an amicable solution,”
said Bhavesh Parekh, head–restructuring services, KPMG.
DRT may also request the company to look into a compromise
package through arbitration. In case of “winding up”, the matter
would be in the hands of the High Court. “In most cases,
it has been seen that the High Court keeps the larger interest
in mind. If the existing business can generate employment,
increase value to creditors, then it may ask all lenders to do
structuring in a way that 75 per cent of banks have to agree,” said Parekh.
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DRT functioning pace draws flak
Source:Staff Reporter/The Hindu March 16,2010
| Number of cases pending disposal on the rise |
Coimbatore: The number of cases pending disposal
seems to be on the rise as far as the Debt Recovery
Tribunal (DRT), Coimbatore, is concerned. Lawyers
and bankers awaiting orders remain an anguished lot.
The reason for the slump in pace of disposal is mainly
attributed to the absence of the Presiding Officer (PO),
who had gone on long leave.The PO at Madurai holding
additional charge of Coimbatore is visiting once a fortnight.
A cross section of bankers approaching the lawyers seems to
have lost faith in the system, because orders have not been
issued in many cases. Bankers pointed out that it was taking
more than 18 to 24 months to even get a recovery certificate.
L.S. Lakshmanan, president, DRT Advocates Association,
said originally two DRTs were sanctioned for Coimbatore,but even before DRT II took off, the Government notified
the establishment of new DRTs in Madurai and Chennai,
reallocating the districts for the DRTs.
This resulted in Coimbatore, Nilgiris and Tirupur districts
remaining with Coimbatore while Erode, Salem, Namakkal,
Tiruchi, Dindigul, Theni and Madurai districts were transferred
to the jurisdiction of DRT, Madurai. Dharmapuri and Pudukottai
districts that remained with DRT, Coimbatore, were
transferred to DRT III in Chennai.
Writ
Mr. Lakshmanan said that the association filed a writ before
the Madras High Court seeking justification for such reallocation,
especially because districts such as Salem, Erode and Namakkal
were within a radius of 100 - 150 km from here.
The Government in its counter contended that the
redistribution of the districts was not on the basis
of geographical location or proximity, but on account of the
number of pending cases.
before DRT, Coimbatore, compared to 2,260 in 2002 when DRT
came into being i.e., when files were transferred from DRT I and II, Chennai.
“The disposal rate had been speedy and it witnessed a slump
only when the post of Presiding Officer remained vacant
between 2003 and 2005,” Mr. Lakshmanan said.
But things started improving thereafter and it was short lived.
The bone of contention now is not just the absence of PO alone.
The concerns include staff shortage and jurisdictionissue consequent to the establishment of a DRT in Madurai.
Delay
Transfer of cases to tribunals based on jurisdiction often led
to a delay of six months for disposal since it required fresh
serving of notices to all defendants after re-numbering the
cases in the new tribunal, he said.
Similarly, indexing, transportation of bundles, verification
and re-numbering of cases also added up to the delay.
Hence, transfer of cases pertaining to Erode and Salem
would be only a counter productive measure, he added.
A Special Leave Petition filed by the DRT Advocates
Association against the order of the High Court had been
admitted and was due to be heard soon, said Mr. Lakshmanan.
Many advocates say that since DRT is a forum for adjudication
of cases, it should function under the Law Ministry.
And the Presiding Officer should be well-versed in
Civil Law. Appointment of a retired/sitting District Judge as the PO will be ideal.
Mr. Lakshmanan said that the proceedings under the Securities
and Reconstruction of Financial Assets and Enforcement of Security
Interests (SARFAESI) Act also faced similar problems because
the DRT was the platform for recovering bank dues.
The delay and backlog
has come as a blessing in disguise for the borrowers
who eventually become the beneficiaries.
There have been instances of the borrowers selling out properties
ignoring the banks’ charges, the advocates point out.
They also want the mortgages to be outside the purview of the
SARFAESI Act and should be brought under the scanner.
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