Monday, June 23, 2008

An entrepreneur duped six banks of Rs5 crore

A 45-year-old city-based entrepreneur, Indrajit Chatterjee, duped six banks of more than Rs 5 crore in the last two years and police is in search of him as he is hiding.

Indrajit Chatterjee had introduced himself as a tenant of an residential building located on 19/1A, Zamir Lane in Gariahat and as the owner of an apartment on Syed Amir Ali Avenue while taking a loan of Rs 1.45 crore from the Rashbehari Avenue branch of Karnataka Bank in December 2007.

He submitted the deed of his apartment to the bank as mortgage. On investigation it was found that he submitted the same deed earlier and had taken a loan amounting to Rs 4 crore from five other city-based banks. The accused is originally a resident of Dumurjala in Howrah and owns two offices at Hare Street and Southern Park which have been sealed by the police recently. A senior officer of the city police's detective department told the accused had taken loans for business purposes. His wife had signed as a guarantor in Chatterjee’s loan application, who was the proprietor of a Bengali film producing unit.

Mr Jawed Shamim, deputy commissioner of the city police's detective department said, officers of the bank fraud section are looking for Chatterjee, but till now they have no leads.

A senior city police officer informed Chatterjee first took loan of Rs 1 crore from the Lake branch of Bank of Baroda in 2006. Later in the same year, he took loan from UCO Bank, Allahabad Bank, City Bank and Canara Bank and each time he his apartment deed as mortgage.

Karnataka Bank authorities came to know about the cheating when Chatterjee didn't pay his monthly interest. Bank authorities registered a complaint against Chatterjee in which they said the Chatterjee was not found in the address which he had mentioned in the loan application papers. “We had raided Chatterjee's residence and offices but he was not there. He has gone into hiding with his wife,” the officer said.

Officer said, a few years ago Chatterjee had also allegedly duped the Gujarati Society of Rs 18 crore a few years ago and a case against him was pending in the Alipore special court of the Central Bureau of Investigation (CBI).

The officer said the police is thinking of advertising in different media outlets in search of information about Chatterjee.

Friday, June 20, 2008

Loans provided to sex workers for self employment projects

In Kolkata Usha Multipurpose Cooperative Bank has been set up to help sex workers to take loan for their self-employment projects and help in opening saving account in the bank. Durbar Mahila Samanwaya Committee has taken an initiative to upgrade the infrastructure of the cooperative bank so that sex workers are able to get more loans. On Thursday state cooperative department bought the bank’s share worth Rs 2 lakh.

The state cooperative department's joint secretary, Mr HP Roy informed, “Over 10,000 sex-workers in the city are account holders of this bank. They often seek bank loans for self-employment projects. The bank would now be able to allot loans to more account holders. The loan amount could be increased as well.”

Besides helping in self-employed projects, the setting up of cooperative banks in the districts will also benefit the sex-workers in saving the money for their future. Moreover, there are plans to recruit the sex-workers and their relatives as bank staff.

Thursday, June 19, 2008

Police nabbed software engineer and his accomplice for cheating banks

Hyderabad police arrested a software engineer and his two other partners for cheating banks of Rs 28 lakh by submitting fraudulent documents. Bandi Durga Prasad was an employed in a firm at Panjagutta. He partnered ship with two others to get loan from bank by floating a bogus software firm and fabricated pay slips of reputed companies.

Later, the trio taking fake pay slips to show that the listed employees were working in Satyam Computers and getting Rs 84,000 salary per month approached various banks including Citibank, Barclays and HDFC to get loans for over Rs 28 lakh.

Cops have been able to arrest Prasad and have launched search for the other two. Police recovered cash totaling Rs 6.5 lakh and one laptop from him.

Tuesday, June 17, 2008

Reverse mortgages for senior citizens yet to gain momentum

Reverse mortgage was designed to provide a major helping hand to old people without a steady stream of income. In India there are around 7.71 crore senior citizens, most of whom have to bear a lot of difficulties in their old age due to inadequate financial resources.
Therefore reverse mortgage scheme was introduced but, is yet to find many though this year’s Budget granted income tax and capital gains exemption on the product.
Under this scheme banks give loan funds to senior citizens as per the value of their property. After the death of the client, the property belongs to the bank.

Up till March 31, PNB had sanctioned 96 such cases all over the country for Rs 38.81 crore. Whereas SBI its competitors in the segment had sanctioned to 6 up till March. Bank sources said however, SBI’s business has picked up in the subsequent months. In fact Syndicate Bank and Union Bank also launched the product over two months back.

An LIC housing finance official told FE that since it launched the scheme in March, there have only been enquiries. “Many senior citizens do not find it acceptable to mortgage their property in their old age. In these three months, not a single reverse mortgage loan transaction has taken place.”

Even though the business has been a slow starter till date, bankers are also cautious about the implications of the recent law cleared by Parliament. The Maintenance and Welfare of Parents and Senior Citizens Act, passed in December 2007, have made it compulsory for children and relatives to take care of parents in their old age. According to Maintenance Tribunals, to be set up under the law soon can ask the heirs of a senior citizen to pay up to Rs 10,000 a month for their maintenance.

According to some bankers this maintenance law can discourage senior citizens from taking to reverse mortgaging facility, which enables them to get a stream of income. K Balasubramaniam, deputy general manager, State Bank of India accepts that, “there may be a remote possibility of the legislation having an impact on the reverse mortgage business.”

Friday, June 13, 2008

Best way to keep recovery agents at bay

If you have taken loan from the bank and have not repaid the amount then you might get nightmare of recovery agent employed by your bank. Firstly the recovery agent will call you and rudely tell you to repay loan amount immediately otherwise you might have to face consequences for this.

There has been an incidence where a BPO employee Sinith Mechery, 25 got call from recovery agent. Mechery says, "It was the worst experience of my life," says BPO employee Sinith Mechery, 25. "Due to some unavoidable circumstances I defaulted on a few loan repayments." He added a recovery agent called him up and rudely demanded that he make an immediate payment. Mechery just hung up on him. "But he called at least 35-40 times that day and his language was abusive. I'd never had an issue with my banks prior to this, but this incident has definitely left a bad taste in my mouth," he says.

Then there was an incidence which shocked the nation, ICICI Bank customer and Mumbai resident Prakash Sarvankar, 38, who had taken a Rs 50,000 personal loan, committed suicide last year, holding a recovery agent responsible for his death in his suicide note.

However there are three persons involved in a recovery story, the lender and the recovery agent. It’s easy to sympathize with the harassed individual, but banks, too, have reasons for outsourcing debt recovery.

Axis Bank chairman and CEO P J Nayak points out, "Axis Bank has an in-house collection department; we also employ reputed third-party collection agencies that comply with non-aggressive methods."

The job an agent, in-house or third-party, is to facilitate the process of recovery. If the borrower doesn't want to deal with a recovery agent, he can directly approach the bank for direct negotiations.

"If there are genuine reasons holding up repayment, we can work with it. For example, credit cards dues can be easily converted to an EMI, which is part payment, instead of the total outstanding due," says Nayak.

Most banks are prepared to make adjustments if the reasons for default are genuine. HDFC Bank spokesperson says that if there is a real problem, the bank works out things as per its policy.

Recovery agents basically work on a commission basis, therefore, are highly motivated to show efficiency.

Arun Saxena, president, International Consumer Rights Protection Council maintain, "Debt recovery agents often treat borrowers in unacceptable, illegal ways. Customers should be careful about giving any money to agents; payments should be made against a proper receipt. One can even approach the National Human Rights Commission if need be."

The important thing is to not get frightened. the Reserve Bank of India has issued guidelines that a recovery agent and the bank that employs him have to honor to protect the interests of both the borrower and the creditor in the debt recovery process.

Earlier this month based on these guidelines, the Supreme Court in one of the case hearing restated that banks cannot deploy goons for recovering loans from defaulters.

Mumbai-based high court lawyer Rohini Pandit says, "The creditors have the right to recover their dues, but there is a right way to so. Laws have to be followed, which is not necessarily followed by many creditors."

The central bank has clearly stated it may ban a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period in case of persistent breach of its guidelines. In fact the RBI can extend the period of the ban or the area of ban.

Hence it is better to be safe otherwise a recovery agent will come into the picture only because you slipped up.

The reasons could be many: overspending, over borrowing, a personal crisis (sickness, loss of employment), or pure bad luck (a loan repayment cheque lost in the post). But at the end you have to be responsible for financial indiscipline.

To help people who have got trapped in debt there are a number of financial counseling centers that offer free service to such people.

Many banks have SMS or email services to alert you on payments. Autopay (or direct debit) is also an easy way to avoid failure to notice on loan repayment cheques.

So it’s better not to take loan more than your capability to repay it back. Though, it is rapidly becoming uncommon.

Wednesday, June 11, 2008

Corporates ask banks to extend fixed-rate loans for three years

Inflation has crossed 8%. Oil prices hiked, prices are expected to remain high there are no signs of reduction and weakening rupee is making imports more expensive. All these factors are creating pressure on interest rates.

Corporates fear the Reserve Bank of India (RBI) might hike interest rates in order to tighten the liquidity in order to control inflation; therefore banks may also raise lending rates. Hence corporates are asking banks to extend fixed-rate loans. Currently, most of the large and mid-sized corporates are taking loans with a one-year reset clause, which means that the interest rates are fixed for one year and consequently come up for review. Therefore corporates are demanding for fixed-rate loans for three years. On the other hand banks have completely stopped offering fixed rate loans for more than one year.

A senior banker told, “Since we take deposits at market-related rates, it is not feasible for us to lend at fixed rates for longer tenure. We will suffer from interest-rate risk.” The best-rated corporates are being charged in the range of 9-9.30% for the one-year fixed-rate loan. On retail loans differential between interest rate for fixed rates and floating rates is high whereas corporates are charged almost the same rate for fixed rates or floating rates. In the current situation where the liquidity is slowly drying from the system and profit on the benchmark 10-year government bonds crossing the psychological barrier of 8%.

The best-rated corporates are charged in the range of 9-9.30% for the one-year fixed-rate loan. Further, unlike retail loans where the interest rate differential between fixed rates and floating rates is high, corporates are charged almost the same rate for fixed rates or floating rates. With the liquidity is slowly drying from the system and yield on the benchmark 10-year government bonds crossing the psychological blockade of 8%, many corporates are rushing to take fixed rate loans fearing that they might have to pay more if rates are hiked.

Currently banks’ prime lending rate (PLR) is secured in the range of 13-15%. However, highly-rated corporates have got most loans at rates way below the PLR. According to bank sources the credit pick-up has been better since the beginning of this fiscal year, as there has been large demand from oil, manufacturing and infrastructure sectors. Sources say that State Bank of India alone has sanctioned close to Rs 20,000 crore since April.

“We are lending aggressively to ensure the momentum continue and to ward off the perceived slowdown in the economy,” said a banker.

“Similarly, the corporates, too, are in a hurry to tie up funds to protect themselves from interest-rate risk,” they added.

Money supply growth is crossing 22.5%, hence it is widely expected that the central bank will come up with monetary measures. Bankers are also expecting that RBI might increase the cash reserve ratio which can push up bond yields higher. In the secondary market for government securities, profits on the 10-year government bonds have increased from below 8% in early May to 8.3%.

Tuesday, June 10, 2008

Women recovery agents to replace men

Now instead of heavily built, threatening collection agents bank loan defaulters will have to face smiling, soft-spoken women employed by banks as recovery agents.

Nearly 200 women across eight cities including Chennai have already been employed by Adhikrut Jabti Evam Vasuli, and are doing job for 20 nationalized banks and gradually their number is growing. A number of times SC has come down heavily on banks for using musclemen for recovering loans, replacing musclemen with women recovery agents looks much better option and have a bright future.

Adhikrut Jabti Evam Vasuli firm had started operation in Indore, now have offices in Tamil Nadu, MP, Rajasthan, Jharkhand, Chattisgarh, Orissa and Karnataka. The agency gives training to the agents in recovery of loans for immovable property. Firm gets around 800 assignments daily.

Vasuli joint managing director, Manju Bhatia, in an interview told TOI that the women recovery agents, consisting of 80% of the Vasuli staff, have changed the concept that recovery agents must be men with muscle power to persuade defaulters.

"Our principle is persuasion is better than prosecution. We make defaulters understand the problems they may face if they don't pay," Manju said.

Quoting instances in Chennai, Manju said, "We have recovered loans by seizing schools and hospitals worth Rs 20 crore. Ten women, assisted by a videographer and a photographer were involved in drive."

Manju said there are a number of reasons for the success of women agents. "Defaulters, who are generally men, find it embarrassing to be addressed by a woman and hasten to pay up large parts of the loan," she said, adding, "Those who find it easy to bribe male recovery agents realize that they can't do the same with women."

Friday, June 6, 2008

Harassed by bank agent man commits suicide

A 32-year-old physically challenged youth Satya Narayan Dutta committed suicide at his Baranagar residence on being hunted and harassed by recovery agents of a private bank for just Rs 17,000.

Satya Narayan had missed only two of his EMIs and for this the bank had sent recovery agent who abused and threatened him. The deceased widow Tapasi lodged a complaint against the bank – Citi Financial – with Baranagar police.

The incident has happened in less than a year after recovery agent of SBI allegedly drove a transporter, Manabendra Mondol, to suicide on August 5, 2007. He had also missed just two installments.

Dutta, a resident of Barada Basak Street, disabled from birth ran a small grocery shop to provide for his family of three. He faced loss in the business therefore he took loan to revive his business.

He applied for loan with Citi Financial on October 2006; Citi Financial agreed to give him personal loan of Rs 28,000, to be repaid in 48 months through fixed EMIs of Rs 1,342. Dutta used the loan for his business and his business improved. Tapasi told, "He paid the installments regularly. The bank approached him with a top-up loan of Rs 13,180 and the EMI was revised to Rs 1,743".

Till November 2007, everything was OK. But in December, when Dutta's cheque bounced bank sent him a notice in January 2008.

Wednesday, June 4, 2008

Banks face crisis as unable to recover loans

The number of loan repayment defaulters has increased; the Reserve Bank of India has put restrictions on the procedures adopted by banks for recovery of loans. Therefore Banks are facing crisis as they have been unable to recover the loans given to various sections of people especially the farmers.

In the Budget 2008-2009 Congress-led UPA Government announced loan waiver scheme for the farmers who had became defaulters to strengthen its vote bank. Centre is finalizing the guidelines for the loan waiver scheme. Meanwhile out of 17 lakh only 2.4 lakh farmers are expected to get benefit of loan waiver and this will increase the burden on the exchequer of about Rs 300 crore. Though, Chief Minister Y S Rajasekhara Reddy has promised to work out a separate package for the farmers who were not covered under the scheme.

The announcement of loan waiver scheme has irked the farmers who have been paying their installments regularly. They are also demanding for their inclusion under the scheme and have stopped repaying the installments.

Telugu Desam supremo N Chandrababu Naidu, during his ‘Mee Kosam’ yatra in the district early this month, as a political stunt has assured the farmers that his party would return to power in the next general elections and he would waive all loans.

During the last financial year ending on March 31, 2008 the combined outstanding of all 190 banks in the district was Rs 1,103 crore during out of which Rs 300 crore waivers has been announced by the Centre but there has been no discussion about the remaining loans.

In an interview a senior bank official told the website's newspaper that, "Due to non-recovery of loans, all banks are worried as they will not be in a position to give fresh loans for the kharif season beginning next month. Last year, the percentage of loan recovery was around 70 per cent but this year, it is abysmally low."

He said the banks are in a state of confusion they don’t what to do as no orders have been received on the loan waiver scheme till date. The kharif time is coming near and the farmers are getting worried as the banks are not coming forward to provide new loans until their previous debts are cleared.

"If the banks fail to provide crop loans in time, the ryots would approach private money lenders pushing the agriculture sector in the district on the brink of disaster," the official said.

According to bank sources some of the banks which had given the maximum crop loans in the district include Andhra Pradesh Grameena Vikas Bank (Rs 152 crore), District Cooperative Central Bank (Rs 130 crore), Andhra Bank (Rs 86.35 crore) and State Bank of India (Rs 83.20 crore). Similarly, many other banks gave crop loans and some of them were in deep trouble, sources said.