Banks cannot attach pension account to recover loan dues: Madras HC [Read Order]...

While allowing a Writ Petition filed by Mrs. A. Muthuiruvakkal of Nagercoil in Kanyakumari district the Madras High Court Madurai Bench of Justice K. Ravichandrabaabu held that a Savings Bank Account maintained primarily for the purpose of depositing monthly pension amount could not be attached by a bank just because the account holder had defaulted repayment of a loan availed from them. 

The petitioner had challenged an order passed by the State Bank of India on August 13 preventing her from operating the pension account for recovering the outstanding loan amount. The counsel for the petitioner Mr.P.Thirumahilmaran submitted that the bank had deducted about Rs.14,681 from the petitioner’s pension account after preventing her from operating the account. It was argued on behalf of the petitioner that putting an S.B. account on hold by passing such an order was impermissible in law as pension amount cannot be attached or recovered for the purpose of recovery of any outstanding amount payable by the petitioner. In support of such contention, the petitioner relied on a decision of the Supreme Court reported in Radhey Shyam Gupta Vs. Punjab National Bank and another wherein the Apex Court had criticized the Rajasthan High Court for ordering attachment of even Fixed Deposits without giving attention to the fact that the loan defaulter in that case had actually converted his pension and gratuity amount into fixed deposits. 
The bank on its part submitted that as there is outstanding dues to the tune of Rs. 2,18,09,971/- and that they were left with no other option except to pass the impugned order.

After hearing the rival submissions the court concurred with arguments of the counsel for the petitioner and observed that “if there is any outstanding due payable by the petitioner, it is for the respondent bank to work out its remedy in the manner known to and permissible by law before the appropriate forum. Without doing so, resorting to attach the pension amount by way of passing the impugned order is impermissible.” The judge set aside the bank’s order and directed it to permit the petitioner to operate the account without any hindrance....
 

Vijay Mallya to pay his dues, says will continue efforts to settle cases with banks

Loan defaulter Vijay Mallya on Tuesday reportedly said that he will settle his dues with various banks. Mallya said that he is tired of relentless pursuit by the Modi government and probing agencies. Mallya further added that he will continue his efforts to settle all dues with Indian banks. 

Vijay Mallya on Tuesday released his letters to Prime Minister Narendra Modi. Vijay Mallya escaped to Britain in 2016 and since then the Modi government has been making efforts to extradite him. Banks are seeking to recover around Rs 9,000 crore from him, Mallya was arrested in 2017 on an extradition warrant.

"I have become the "Poster Boy" of bank default and a lightning rod of public anger, " he wrote in one of his letters to the Prime Minister Narendra Modi. 

"The ED have also attached assets belonging to me, my Group Companies and companies owned and/or controlled by my family under the Prevention of Money Laundering Act (PMLA) currently valued at approximately Rs 13,900 crore," he added.

Meanwhile, the Enforcement Directorate (ED) has submitted a second charge-sheet in a special court against businessman Vijay Mallya, UB Holding and the now-defunct Kingfisher Airlines along with others charging them of laundering Rs 9,990 crore which they had fraudulently availed as loan from the SBI-led consortium of 17 banks.

The charge-sheet claims that Mallya used his Force India Formula 1 team and IPL team Royal Challengers Bangalore for money laundering. A year ago, the ED had filed the first charge-sheet against him and eight others for defrauding IDBI Bank of Rs 900 crore and laundering it.

The latest charge-sheet indicated that Mallya-controlled Kingfisher Airlines took a loan of Rs 6,027 crore from the consortium on personal guarantee of Mallya, corporate guarantee of UB Holdings and an inflated brand guarantee of Kingfisher Airlines.

The charge sheet cited four instances wherein the loan amount to Kingfishers Airlines by a consortium of backs were diverted. The loan ostensibly taken for operational expenses of Kingfisher Airlines was used for other purposes, including procuring a chartered aircraft for Mallya’s personal use.

The charge-sheet claims that Mallya laundered the loan money with the help of shell companies with dummy directors who were fronts for Mallya. He also allegedly procured properties in the name of these companies and routed the money abroad through over-invoicing of lease rent for aircraft which he procured from a Mauritius-based company for Kingfisher Airlines.

THE crisis in the banking industry does not seem to be ending anytime soon

THE crisis in the banking industry does not seem to be ending anytime soon. The latest news about the arrest of Bank of Maharashtra’s top executives comes on the heels of the continuing saga in ICICI over the links of Chanda Kochhar’s husband with Videocon. Combined with the fleeing of Vijay Mallya, the PNB scandal involving diamond tycoon Nirav Modi and the enormous pile of NPAs afflicting the sector, the impression is that nothing but bad news is emanating from the country’s banks.

Worse is the extreme reaction by regulatory authorities and the government: instead of taking a holistic approach to problems, panic seems to be the guiding action ending up with innocent bystanders being hanged, or virtually so. The decision to go ahead and arrest top Bank of Maharashtra officials falls in this category. It is alarming that a system that has not been able to bring to book powerful industrialists who have defrauded the financial system, leaps into precipitate arrests of public sector employees who have been doing their legitimate jobs.

It is indeed in the fitness of things that the Indian Banks Association has called for a committee to consider charges against bankers before drastic action like arrests is taken. In the case of the Bank of Maharashtra, the Pune Police’s economic offences wing was investigating fraudulent deposits invited by a real estate developer and roped in the public sector bank for having given it a loan. In this case, recovery proceedings for the loan were under way and there is no indication of any malfeasance in credit appraisal. The amount of the loan — about Rs 100 crore —  is paltry considering the amount lent to tycoon Vijay Mallya who left this country without any of the economic offences wings taking action against him.

This is not to say that the banking system both in the public and private sector does not need remedial revamping. But reforms will not be possible by undertaking a witch hunt against reputable bank officials who have followed due diligence in procedures. It has to be pointed out that many of the infirmities in the system are due to political control over the public sector banks (PSBs). It has now been widely acknowledged that many of the bad loans were due to pressure from influential political leaders. This aspect cannot be wished aside as the attempt to use the nationalised banking system for individual profits cuts across party lines. The question has to be asked, how many political leaders are being put behind bars for making phone calls to bankers to insist on loans being granted to unworthy recipients.

PSBs are also asking about the favoured treatment being given to private banks for similar defaults. Here the case of ICICI Bank’s chief executive, Chanda Kochhar is relevant. One of the stars of the banking system, mentored by the legendary KV Kamath, Kochhar has been commended over the years for her competent handling of the country’s largest private bank. The news about her husband’s financial dealings with Videocon and a loan to that company by ICICI Bank has cast a cloud over her achievements. Without in any way prejudging the issue, she should have stepped down from her post immediately to enable an impartial investigation into the allegations. In this case, she was given a long rope. This is in stark contrast to the harsh treatment meted out to PSB executives by investigating agencies. In the ICICI Bank case, the CBI has been involved so it is a serious issue, whatever the outcome. Hence one needs a level playing field in such aspects for those working in both public and private banks.

Apart from these scandals that have rocked the financial world, the banking system has had to deal with the weight of accumulated NPAs (non-performing assets) that have created havoc in the balance sheets of both public and private banks. The RBI’s assessment is that NPAs rose gradually after 2011 owing to a period of rapid credit growth from 2006 to 2011.  The numbers shot up dramatically after 2015 once the RBI tightened norms for NPA recognition. As a result, what were earlier said to be standard assets became NPAs.

The good news is that firm action has finally been taken after the establishment of the Insolvency and Bankruptcy Code. The first success in this entire process has been the sale of Bhushan Steel for roughly Rs 36,000 crore to Tata Steel. With this first step, can one share the Finance Ministry’s confidence of recovering Rs 1 lakh crore this year? This is just the beginning but it certainly augurs well for a sector that has not been able to see the end of this dark tunnel for a long time.

Banking is clearly in the throes of a crisis but the churning may end up with some much needed changes in the system. The RBI has already begun to tighten regulatory operations but it has rightly pointed out that it cannot police each and every bank action. The role of bank boards needs to be expanded to ensure more accountability and better corporate governance is the need of the hour. The government’s role also needs to be redefined in the case of PSBs which have been prone to political pressures. Indian banking may thus be under siege but if reforms move in the right direction, it could be looking forward to a brighter tomorrow.

Government wants Life Insurance Corporation (LIC) of India to pick up a majority stake in the troubled IDBI Bank. This is wrong at multiple levels. see details

The news going around is that the government wants Life Insurance Corporation (LIC) of India to pick up a majority stake in the troubled IDBI Bank. This is wrong at multiple levels.

Let's try and understand this in detail.

1) Among all public sector banks, IDBI Bank is in the worst situation. It has a bad loans ratio of close to 28%. This basically means that Rs 28 out every Rs 100 the bank has given out as a loan, hasn't been repaid for 90 days or more.

In simple English, the government is basically unloading its junkiest bank on the insurance behemoth, and hence, on the people of this country.

As on March 31, 2018, the bank had Rs 55,000 crore worth of bad loans. Over and above this, it has stressed loans of Rs 60,000 crore, which means that the bad loans of the bank can keep going up in the months to come.

There is a school of thought that says that LIC should be allowed into the banking sector. But on the basis of what? What expertise does LIC have in the core-banking area?

2) Currently, LIC owns 10.82% stake in IDBI Bank. If it has to own a 51% stake, it needs to buy 40.82% stake more from the government. This would cost LIC Rs 9,895 crore at its current valuation. That is basically small change for the insurance behemoth. But that is not where it will stop. As the majority owner of the bank, LIC will have to keep infusing capital into the bank, to keep it going, in the years to come. And this is where things get complicated.

3) The government is killing two birds with one stone. First, it will get some money out of LIC for buying IDBI Bank (we will discuss this in detail, later in the piece). Second, if it had continued to own IDBI Bank, it would have had to continue providing capital to the bank, in the future. That obligation now comes down, with LIC also having to provide capital.

4) Many analysts feel that LIC buying IDBI Bank, will be like ONGC buying HPCL, and money from one arm of the government will move to another arm. When ONGC bought HPCL it paid money to the government. Given that ONGC is also majorly owned by the government, money from one arm of the government moved to another arm.

Applying the same logic, in case of LIC buying IDBI Bank, is incorrect. Why?

The money that LIC has is what investors/savers have handed over to it, over the years. This is the money that LIC collets as premium from policyholders every year. It is not government money. It is the money that the average Indian has handed over to LIC, because he or she trusts LIC to do a good job of it, by investing it in the safest possible way.

(On a different, the ONGC-HPCL deal also comes with costs attached. The cash on the books of ONGC came down dramatically after it bought HPCL from the government. This means its ability to search for more oil came down as well. In the years to come, India's dependence on imported oil, will only increase. The company also had to borrow money to pay for HPCL, increasing its debt. All this was done to make sure that the government fiscal deficit came down).

5) By using this money to buy IDBI Bank, LIC is essentially abusing the faith that the average Indian has in it. Of course, this is not the first time it is happening. In the past, LIC has been used to rescue public sector initial public offerings as well as further public offerings. But those companies still had some business. IDBI Bank is pure junk.

The situation becomes even worse when you realise that the average investor in LIC, is basically financially illiterate. And all he has is faith.

6) One theory that has been offered is that if IDBI Bank turns around in the years to come then LIC will benefit from it. It is worth remembering here that LIC is not a hedge fund. It also not an asset reconstruction company or a private equity fund, which essentially can buy a business down in the dumps, and hope to turn it around.

Long-story short, LIC is not in the business of speculating on the hard-earned savings of the average Indian citizen. Simple.

7) How does the government benefit from this? First and foremost it earns close to Rs 10,000 crore by dumping a junk bank on the citizens of this country. This helps in meeting the disinvestment target of Rs 80,000 crore for this year. Genuinely achieving this target has become difficult for the government given that the planned privatisation of Air India hasn't gone anywhere. Hence, it has had to resort to such tricks.

Secondly, with LIC now being a major owner it will have to keep providing capital to keep the bank going. That will mean one headache lesser for the government. All this essentially helps the government in controlling the fiscal deficit number. Fiscal deficit is the difference between what a government earns and what it spends.

8) Another point that needs to be made here is that once one junk bank has been sold to LIC, what is the guarantee that this is where it will stop. The government owns many junk banks, for which it needs to constantly keep providing capital to keep them going.

The more such banks the government sells to LIC and other public sector enterprises, the better its fiscal deficit number is.

Have the floodgates been opened? Will the State Bank of India next buy Indian Overseas Bank next?

9) LIC owns a stake in each of the 21 public sector banks. This is not surprising given that it is in the business of investing. However, it owns more than 10% stake in six public sector banks. In fact, it owns more than 9% stake in ten public sector banks. In 2015 and 2016, LIC bought preferential share issues of many public sector banks.

When this was happening, SS Mundra, then deputy governor of the Reserve Bank of India had told the Business Standard in an interview that LIC's high exposure in banks can impact financial stability. As he had said: "Suppose the banking sector is not doing well and is in trouble, the equity holding of LIC will see a value erosion. This effects the capability of the insurer to serve their policyholders. The other interconnected issue is if LIC wants a fire-sale of the shares, then it creates a contagion in the markets. In any case, if too much of bank shares are held by one entity, the habit and capability of banks in tapping the market gets impacted. This has an implication for financial stability."

The point being that LIC already has enough exposure to the public sector banking sector. Over and above this, with 71% share in the first year's premium in the insurance sector, LIC is already a too-big-to-fail institution. If it starts owning banks as well, the concentration of risk will be tremendous. And that is clearly not advisable.

10) There is no free lunch in economics. Individuals who buy LIC policies will have to pay for this and other such disastrous decisions in form of lower returns. There has been a lot of talk about how every LIC policy comes with a sovereign guarantee. But the guarantee is on the capital and not on the returns.

Also, if the situation does arise, it is worth asking how will the government fulfil the sovereign guarantee? Either by printing money or by borrowing more, and both come with costs attached to it. So, sovereign guarantee doesn't mean anything, if it has to be encashed.

11) And finally, dumping IDBI Bank on to LIC, is definitely not an example of saaf niyat, as the country has been promised. If the government wants to continue to own IDBI Bank, then it should continue to provide capital to the bank, and account for it in the fiscal deficit number. These financial tricks are not going to help anyone. They are just going to postpone a problem and in the process create a bigger one.

source from vivek kaul's dairy

Bankers worry over arrest of Bank of Maharashtra CEO, want Govt to intervene

The Indian Banks' Association (IBA) on Friday came out in support of Bank of Maharashtra's top officials, just two days after they were arrested.

The IBA met with top officials from public sector banks, private sector banks and foreign lenders and decided to seek the Finance Ministry's intervention over the sudden arrests on Wednesday.

"All the bankers unanioumously expressed anguish and concerns for what has transpired there for bonafide decision taken in the discharge of official duties...The officials are worried that genuine banking decisions are being questioned," said VG Kannan, Chief Executive Officer of IBA, after a meeting that lasted close to three hours.

He said the senior officials of the bank have been arrested for criminal conspiracy and "in violation of Maharashtra Protection of Interest of Depositors in Financial Establishment Acts, 1999", adding that this is not applicable to banks.

This committee will be formed to "give clearance for initiating criminal proceeding on senior executives of banks to ensure smooth functioning of banking industry and enabling decision making," Kannan said in an emergency conference with reporters after the meeting.Bankers have also sought the government's help to form an independent committee with representatives from both the government and the Reserve Bank of India, and retired bankers.

IBA will also ask the government to consider an insurance cover for bankers for the costs incurred on fighting such cases after their retirement.

Arrest after yoga classThe concerns come after Bank of Maharashtra CEO Ravindra Marathe was arrested on Wednesday by the Pune police's economic offences wing, while he was returning from his yoga class.

Marathe's colleagues, the bank's executive director Rajendra Gupta, zonal manager Nityanand Deshpande and former chairman Sushil Muhnot were also arrested for allegedly extending loans to the scam-tainted DSK Group.

Condemning the arrest, Kannan said that the officials were now behind bars despite the bank disclosing that the loan exposure to DSK Group was as low as Rs 94 crore, and was fully secured and disbursed before Marathe took charge.

IBA-Government meet soon

Kannan also said that as per RBI guidelines, frauds involving amounts exceeding Rs 25 crore are to be only handled by the Central Bureau of Investigation (CBI), and not the state police.

The IBA has sought appointment with senior government officials sometime next week to present a detailed memo to take remedial action.

"The entire banking community is with the BoM management and the IBA has decided to approach the highest authority," Kannan said.

The IBA's solidarity comes a day after the Bank of Maharashtra's shareholders, and bank unions led by the All-India Bank Employees Association, had backed Marathe.

In a letter to Financial Services Secretary Rajiv Kumar, the bank unions had said it was surprising that the arrested bank executives were not connected with the cheating by DSK Group

Nirav Modi stayed in flat above jewellery store in London

Indian billionaire Nirav Modi was living in a flat just above his jewellery store in the post Mayfair area of London while he was being hunted in India for an alleged money laundering case linked to over USD 2 billion, according to a media report today.

The 47-year-old diamantaire was able to travel in and out of Britain at least four times since his passport was cancelled by the Indian authorities in February.

During his stay in London, he was reportedly living in the heart of the city above his jewellery boutique called "Nirav Modi" on Old Bond Street, which was reportedly closed last week, The Sunday Times reported.

"Why are they always ending up in London? It's as if the UK is a safe haven," the newspaper quoted an Indian official as saying.

That Modi has been using Britain as a "safe haven" threatens to damage diplomatic ties between India and the UK and further scupper prospects of a post-Brexit trade deal, the report warned.

Nirav Modi and his uncle Mehul Choksi are accused of benefiting from a huge fraud against the Punjab National Bank, the country's second largest lender, to the tune of more than USD 2 billion.

Indian court has issued warrants for the arrest of Modi and Choksi.

On February 23, the Indian authorities revoked Modi's passport, contacting Interpol and the UK government soon after. But official records reveal Modi travelled from Heathrow

Airport to Hong Kong on March 15, and from New York to Heathrow Airport on March 28.

Three days later, he flew from London to Paris. On June 12, Modi is thought to have boarded the Eurostar train from London to Brussels, the newspaper claims, adding that unconfirmed reports claim Modi has applied for asylum in the UK.

The UK Home Office and Border Force declined to discuss individual cases but said in a statement: "All passengers attempting to enter the UK are subject to checks by Border Force officers to identify people of concern." "Border Force works with international partners to ensure the most up-to-date information is available." In the UK, Nirav Modi's jewels have been made famous by British actress Kate Winslet sporting the diamonds at the Oscars in 2016. Also, his advertising campaigns have been fronted by the British model Rosie Huntington-Whiteley. 

Heads of 11-PSBs to appear before the Standing Committee on Finance on Tuesday

Heads of 11-state owned banks will apprise a parliamentary committee about the problems of mounting bad loans and increasing fraud cases on Tuesday, sources said.

They will be appearing before the Standing Committee on Finance, headed by veteran Congress leader M Veerappa Moily, which is looking into ‘Banking Sector in India- Issues, Challenges and the Way Forward, including Non- Performing Assets/ Stressed Assets in Banks/Financial Institutions’.

Top officials of IDBI Bank, UCO Bank, Central Bank of India, Bank of India, Indian Overseas Bank, Dena Bank, Oriental Bank of Commerce, Bank of Maharashtra, United Bank of India, Corporation Bank and Allahabad Bank, will make presentations before the panel and respond to queries on June 26, said sources.

Many concerns

The banking sector is grappling with rising non-performing assets (NPAs), which touched Rs 8.99 lakh crore or 10.11 per cent of total advances at December-end 2017. Of the total gross NPAs, the public sector banks accounted for Rs 7.77 lakh crore.

The rising number of frauds has become a serious cause of concern. The number of frauds reported by banks increased from 4,693 in fiscal 2015-16 to 5,904 in 2017-18. The fraud amount at end-March 2018 was Rs 32,361.27 crore, up from Rs 18,698.8 crore at the end of 2015-16.

Earlier this month, RBI Governor Urjit Patel had replied to host of questions asked by the committee members. Patel, sources had said, was asked about bad loans, bank frauds, cash crunch and other issues. They also said he assured the panel members that steps were being taken to strengthen the banking system.

Bank Of Baroda (BoB) Requires Probationary Officers, Offers Annual Salary Of Rs. 8 Lakh

Bank of Baroda and Manipal Group have joined hands to set up the Baroda Manipal School of Banking (BMSB) to cater to the needs of training graduates in order to make them job-ready for a career in banking with Bank of Baroda. On successful completion of the programme within the stipulated time period, they shall be absorbed as probationary officers by Bank of Baroda, the bank said on its website, bankofbaroda.co.in. Candidates will be selected on the basis of an exam and subsequent interviews.  


Admission to the programme offered by Bank of Baroda and Manipal Group
Candidates shall be selected through a selection process consisting of online exam (objective + descriptive) followed by psychometric assessment, group discussion and personal interview.

(Candidates will be selected on the basis of an exam and subsequent interviews, said Bank of Baroda.)

Schedule of Events	Dates
Start date for Online Registration	12.06.2018
Online Payment of Application Fees / Intimation Charges	12.06.2018 to 02.07.2018
Last date for Online Registration including Edit / Modification of Application by candidates (including far flung areas)	02.07.2018
Download of Call letters for Online Examination (Tentative)	After 18.07.2018
Date of Online Examination (Tentative)	28.07.2018

Course details
The selected students will go through nine months of on-campus residential program at the Baroda Manipal School of Banking leading to the award of a Post Graduate Certificate in Banking & Finance by Manipal University followed by a three months work integrated learning (WIL) in the form of on the job training at any branch of Bank of Baroda leading to the award of a Post-Graduate Diploma in Banking & Finance by Manipal university. The course is extendable to a further 18 months of blended learning which is optional at the option of the students and which will lead to award of MBA in Banking and Finance from Manipal University.

Important Events	Dates
Commencement of on-line registration of application	6/12/2018
Closure of registration of application	7/2/2018
Closure for editing application details	7/2/2018
Last date for printing your application	7/17/2018
Online Fee Payment	12/06/2018 to 02/07/2018

Final Placement at Bank of Baroda
On successful completion of the Post Graduate Certificate in banking and finance, the candidate would be offered appointment in Bank of Baroda as PO in JMG/S-I and can be posted anywhere in India as per the bank's discretion.

Emoluments/Salary on final placementat Bank of Baroda
On successful completion of the Post Graduate Certificate in Banking and Finance, the candidate would be offered appointment in the Bank as PO in JMG/S-I which is presently in the scale of pay Rs. 23700-980x7/30560-1145x2/32850-1310x7/42020. They will also be eligible for dearness allowance, house rent allowance/ rent reimbursement & city compensatory allowance as per rules from time to time. At present, the initial annual cost to company is approximately Rs. 8 lakh (including perquisites) in a metropolitan centre.

The gross annual salary on joining the bank will be approximately Rs. 8 lakh (including perquisites) in a Metropolitan Centre. Officers are also entitled for various benefits / perquisites, facilities from the bank like various reimbursements / perquisites, concessional loan facilities for different purposes, LTC / LFC, holiday home, medical facilities for self and dependents, etc.

The above mentioned various salary / perquisites, benefits, etc. may increase in future, by the time the candidates joins the services of the Bank.

Stipend, incentives and reimbursements offered by Bank of Baroda
A stipend amount will be paid to the students during the entire duration of the -nine months course of the Post Graduate Certificate in Banking & Finance Programme. A total of Rs. 2,500 during the nine months campus period will be paid as stipend.

Reimbursementsoffered by Bank of Baroda
The fees amount will be reimbursed by Bank of Baroda after completion of five years of service in the Bank. This is applicable for the students of upcoming batches (Batch 13 onwards) joining after September 2014. For 1st to 12th Batches, reimbursements will be made as enumerated in their offer letter or as modified from time to time.

0COMMENTS

Service bond with Bank of Baroda
On successful completion of the course within the stipulated time period, BoB would offer appointment as a Probationary Officer in JMG/S-I. At the time joining of Bank's services, the candidate will have to execute a service bond for serving a minimum of three years in the bank w.e.f the date of their joining Bank's service or else, shall pay back to the bank the full amount of stipend received by him / her during the program, a notional amount of Rs. 1 lakh towards the cost of on-the -job training and also liquidate the entire educational loan outstanding at that point in time at the prevailing card rate from the date of availing of loan.

From the third year onwards, any officer leaving the Bank's service will only have to clear his / her outstanding educational loan dues at applicable card rate. This condition is applicable to the candidates joining for BMSB from the selection exercise 2015-16 onwards. In case of candidates from 1st to 15th Batch (up to Selection exercise 2014-15), the period of service Bond will be two years.

The Reserve Bank of India (RBI) recently increased the home loan limits for priority sector lending.-but why read this article fully please

The Reserve Bank of India (RBI) recently increased the home loan limits for priority sector lending.

Up until now home loans "to individuals up to Rs 28 lakh in metropolitan centres (with population of ten lakh and above) and Rs 20 lakh in other centres, are eligible to be classified under priority sector, provided that the cost of dwelling unit does not exceed Rs 35 lakh and Rs 25 lakh, respectively."

As per the new definition, the home loan "limits for eligibility under priority sector lending will be revised to Rs 35 lakh in metropolitan centres (with population of ten lakh and above), and Rs 25 lakh in other centres, provided the overall cost of the dwelling unit in the metropolitan centre and at other centres does not exceed Rs 45 lakh and Rs 30 lakh, respectively."

The question is why has this been done? Let's take a look at the growth in total outstanding priority sector home loans, year on year. Take a look at Figure 1.

Figure 1:  

Figure 1 clearly tells us that the growth of total outstanding priority sector home loans has slowed down dramatically in 2017-2018. It was at just 1.97%. In 2017-2018, only a total of Rs 7,243 crore of priority sector home loans were given out. In comparison, in 2013-2014, Rs 34,800 crore worth of priority sector home loans were given out. There has been a massive fall since then.

In fact, the proportion of priority sector home loans in overall home loans outstanding has been coming down over the years. Take a look at Figure 2.

Figure 2:  

Priority sector home loans as a proportion of total home loans outstanding has fallen from a high of 72.4% in 2009-2010 to around 38.5% in 2017-2018.

Now let's take a look at what pace the total outstanding non-priority home loans, have been growing. Take a look at Figure 3.

Figure 3:  

Comparing Figure 3 with Figure 1, it is clear that non-priority sector home loans have been growing at a much faster pace than the priority sector loans. Further, in absolute terms the total amount of non-priority home loans being given out year on year, are much more than the priority sector home loans.

Let's take the case of 2017-2018. As mentioned earlier, priority sector home loans worth Rs 7,243 were given out. In comparison, non-priority sector home loans worth a total of Rs 1,07,236 crore, were given out during the year. In 2016-2017, the loan numbers stood at Rs 26,068 crore and Rs 87,238 crore, respectively. This marked difference, has only gone up over the years.

What this tells you is that the current definition of priority sector home loan lending had become irrelevant over the years, with a greater part of the lending being carried out in the non-priority category. And that explains why RBI changed the definition of priority sector lending.

Now a home loan given against a home, which is worth as much as Rs 45 lakh, in a metropolitan city, will be categorised as lending to the priority sector. This definition itself tells us how grave India's housing crisis is. How many Indians, even those living in metropolitan cities, can afford a home which costs Rs 40-45 lakh?  

Someone at the Reserve Bank of India(RBI) has a wicked sense of black humour. This rejigging of the definition is the RBI's way of telling us that real estate in India is only for the rich.

Now let's look at a few more points.

As we like to say whenever we analyse anything to do with real estate in India, it is very difficult to say things with full certainty, given the lack of institutional data.

So, what do the home loan numbers we have discussed above actually tell us?

1) Have home prices fallen? This is a question that everyone wants a clear answer for. But given the lack of agglomerated data put out by a credible agency, this has always been a difficult question to answer.

Nevertheless, given that the non-priority home loans continue to grow, it is safe to say that on the whole across the country home prices really haven't come down. Of course, they may have fallen in parts of the country, like the National Capital Territory. Otherwise, home prices continue to remain high.

Also, this does not mean that home prices are rising, like they did between 2002 and 2011. At some level they have stagnated. (We can come to this conclusion from the fact that non-priority home loans are not growing at the same pace as they were a few years back).

2) Another possible explanation here can be that people have been buying bigger homes now than in the past. And this explains why the non-priority home loans have gone up, over the years. But applying Occam's Razor, i.e., the simplest explanation is the right one, we go back to the original point of prices having not fallen.

3) The total amount of home loans being given out in the priority-category has been falling over the years. It has come to a stage now where the RBI has had to change the definition itself. This tells you very clearly, there is nothing like genuine affordable housing in India. While builders can pass of homes worth Rs 50-60 lakh as affordable housing, but that is not genuine affordable housing. Even the RBI now thinks houses worth Rs 45 lakh are affordable housing, given that lending against such homes will now be categorised lending to the priority sector.

4) If the non-priority home loans continue to grow, how do you explain the fact that builders are stuck with a large amount of inventory or the fact that new launches have come down? This is the simplest question to answer, among the ones that we have raised here.

As we have explained in the past, prospective home buyers now want to buy homes which are ready to move in. People want to avoid under-construction projects. That is for sure.

Further, other than builder inventory, there is also the individual inventory of real estate investors who have bought homes over the years and have been sitting on it. They are a little more flexible on the price front than builders sitting on inventory.

Hence, home loans have continued to grow, despite builders continuing to sit on a huge amount of inventory.

Long story short-India's real estate continues to cater to the rich. Not much has changed on that front.

Bank Of Maharashtra Chairman Arrested in Rs. 3,000 Crore Fake Loans Case

 In a sudden development, the Economic Offences Wing (EOW) here arrested Ravindra P. Marathe, the Chairman and Managing Director of Bank of Maharashtra, in a case of R
s.3,000 crore fraudulent loans extended to Pune's DSK Group, an official said here on Wednesday. The EOW has also arrested the bank's Executive Director Rajendra K. Gupta, Zonal Manager Nityanand Deshpande from Ahmedabad and former CMD Sushil Muhnot from Jaipur.

The 83-year-old Pune-headquartered Bank of Maharashtra is ranked among the major public sector banks in India.

Two officials of the DS Kulkarni Group, chartered accountant Sunil Ghatpande and VP Engineering Rajiv Newaskar, have also been arrested in the same case, the police said.

Marathe has been arrested for allegedly misusing his powers to sanction huge amounts of loans to shell companies.

According to the investigators, the bank executive and officials colluded with the DSK Group "with dishonest and fraudulent intentions to sanction and disburse the amount of the bank (BoM)" under the garb of loans and the money was later siphoned off.

All the arrested accused have been charged under various provisions of the Prevention of Corruption Act and other laws pertaining to cheating, forgery, criminal conspiracy and breach of trust.

The Pune-based mega group's owners D.S. Kulkarni and his wife Hemanti were arrested in February on charges of cheating over 4,000 investors of over Rs. 1,150 crore and diverting bank loans of nearly Rs. 2,900 crore.

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As a follow-up in the case, last month, the Maharashtra government had ordered attachment of more than 120 properties, 275 bank accounts and four dozen vehicles belonging to the owners and the company invoking the provisions of Maharashtra Protection of Interests of Depositors Act, 1999.

The public’s money is “extremely safe” in public sector banks and the government is 100% committed to these banks

The public’s money is “extremely safe” in public sector banks and the government is 100% committed to these banks, Finance Minister Piyush Goyal said on Tuesday.

“Public money is extremely safe in public sector banks,” Mr. Goyal said at a press conference following a meeting with the heads of public sector banks. “The government stands behind public sector banks 100%, and their money is extremely safe. Government-owned banks’ deposits are 100% safe and secure.”

The Finance Minister also said that the government was open to the idea of providing the Reserve Bank of India with more powers to effectively regulate and manage public sector banks. His statement follows RBI Governor Urjit Patel’s statements to the Standing Committee on Finance that the central bank needed more powers, such as the ability to appoint and dismiss the heads of PSBs.

“The government stands 100% committed to support each and every one of our public sector banks and to ensure the viability and successful future of every PSU bank, particularly because they are the engines which take financial inclusion to the last man at the bottom of the pyramid,” Mr Goyal added. “I don’t think that PSBs have got into losses or got into trouble now. This was already existing, it’s only that we have shown the mirror to the world and actually brought it down the table.”

Following the meeting with the bankers, Mr Goyal said the PSBs had come up with a plan to take up the credit needs of “genuine, deserving, well performing and good companies”. In the first stage, they will assess the needs of companies who have borrowings between Rs 200 crore and Rs 2,000 crore. In the second stage, they will take up the accounts with borrowings of up to Rs 200 crore, which he said would also cover MSMEs.

After Dena Bank, more PSBs may be told to stop fresh lending

The Reserve Bank of India (RBI) may hand out diktats similar to the one given to Dena Bank to more banks under its prompt corrective action (PCA) framework.

Apart from Dena Bank, the credit and financial profiles of Bank of Maharashtra, Oriental Bank of Commerce, Allahabad Bank and UCO Bank are in bad shape — all these are under PCA. None of the five has reported any improvement in their recently declared January to March quarter results, as the level of net non-performing assets (NPAs) remained high and return on assets (RoA) remained in the negative in 2017-18.

Their capital adequacy is in line with Basel III norms due to heavy equity capital infusion by the government, their promoter, since 2015-16. A substantial portion of their net worth has been used to provide for the rising pool of non-performing assets (NPAs).

In all, 11 state-owned banks are under PCA. The government is slated to conduct a review of some of them on Thursday (May 17).

A person heading the financial sector at an Indian rating agency said there were no reasons to believe what happened with Dena Bank would not be applicable to other banks under PCA. Their performance continues to be under pressure, showing high risks of further deterioration. 

 Another top executive with a south-based bank, also under PCA, said the RBI’s abrupt decision in February to scrap restructuring schemes, including strategic debt restructuring, came as a blow. As a consequence, NPAs — gross and net — grew substantially in the fourth quarter. And, hence, the RBI may be inclined to impose severe restrictions on lending in the coming quarters.

Other banks under PCA — IDBI Bank, United Bank, Corporation Bank, Bank of India, Central Bank of India and Indian Overseas Bank — are yet to declare their results for the fourth quarter and for 2017-18.

While taking the decision on putting a bank under PCA, the RBI assesses the lender’s capital adequacy ratio (CAR), NPAs and RoA. 

Banks become PCA candidates when they breach the minimum requirements of CAR, their net NPAs rise above 6 per cent, or the RoA is negative for two years. Breaching any one condition is seen sufficient for triggering PCA. Those under PCA face restrictions on expanding their loan book, as the aim is to turn the bank around and improve financial and credit profiles.

Banks are pinning hopes on substantial recoveries from large accounts that are in the National Company Law Tribunal (NCLT) for resolution under the Insolvency and Bankruptcy Code. But profits may be elusive.

Bankers involved in the recovery process are sceptical about the promptness of the NCLT. Various benches of the tribunal are facing work pressure and it is taking three-four months for cases to be admitted. “Perhaps the NCLT is going the debt recovery tribunal way, which was mired in a huge backlog and delays,” said a person heading recovery at a Mumbai-based PSB.

Plus, there is a tendency among borrowers (who have lost control over their company) and companies in the fray to purchase assets to approach the National Company Law Appellate Tribunal and the Supreme Court to engage in litigation, delaying the process further.