This PSB is going to auction actor Sunny Deol's Juhu property to recover loan

Public sector lender Bank of Baroda (BoB) has issued a notice to Bollywood actor Sunny Deol for auctioning his villa in Mumbai’s Juhu citing non-payment of dues amounting to nearly Rs 56 crore.

In a notice published in a national newspaper on August 19, 2023, BoB said the villa will be e-auctioned on September 25 due to non-payment. As per the notice, Deol, whose real name is Ajay Singh Deol, is the borrower and guarantor of the loan and has allegedly failed to pay the amount to the bank on time.

According to the rules, a loan becomes a non-performing asset (NPA) if there is no repayment of interest and principal for a period of 90 days. Banks need to set aside money to cover likely losses from such loans and they typically auction such properties to recover the amount.

"The loan was taken for the purpose of film financing in 2016, and it is an NPA since last year December 2022," said a person familiar with the matter speaking on condition of anonymity.

An email sent to BoB for official response did not elicit any response till the time of filing this copy. Moneycontrol couldn’t immediately reach out to Deols for a comment.

The development comes in the backdrop of a recent mega release of Deol’s movie. ”Gadar 2”, starring him and Ameesha Patel, which has crossed Rs 300 crore mark at the domestic box office on August 19.

Directed by Anil Sharma, the film is a sequel to the 2001 blockbuster ”Gadar: Ek Prem Katha”. The movie, a Zee Studios production, released in theatres on August 11. In a press note, the makers claimed the film has ”soared to a remarkable all-time high for any Hindi film”, especially in territories like Punjab.

In response to a query, Sunny Deol's representative said "We are in process of resolving this issue and the issue will be resolved. We request for no further speculation on the same."

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BoI expects to recover 2,500 crores of bad loans per quarter

Bank of India (BoI) has set an ambitious Rs 2,500 crore quarterly recovery target for the current fiscal year as the public sector bank looks to expand after years of stagnation. CEO AK Das said he expects the loan book to grow in double digit this year and hopes to keep slippages at an average of Rs 600 crore per quarter.

The public sector bank reported gross NPAs at 9.98% of loans as of March 2022, down from 10.46% in the quarter ended December. Das said he expects the bank's NPA to be below 8% in March 2023 due to a combination of improving bad loan recoveries and restrained fresh slippages.

"Our target is to recover Rs 2500 crore per quarter and allow only Rs 600 cr to slip so that we are in positive territory on NPAs. Until the third week of June, we have done Rs 1900 crore of recoveries so far in the first quarter," Das said.

However, a large part of the recoveries depend on the bank's cases in the National Company Law Tribunal (NCLT) in which Rs 32,000 crore out of 45,000 crore gross NPAs of the bank are awaiting progress. The bank will also sell Rs 2400 cr bad loans to the newly launched National Asset Reconstructuin Co Ltd (NARCL).

BoI is the lead lender to the debt laden Kishore Biyani promoted Future Group that owes lenders more than Rs 25,000 crore. In April it initiated insolvency proceedings against the Future group which is yet to be admitted by the National Company Law Tribunal (NCLT). Das said the bank recognised Rs 600 crore of slippages from the Future Group in the quarter ended June 2022 and has now fully provided for its exposure to the group.

Das said higher recoveries will compliment the bank's growth plans as it looks to expand its loan book with larger bets on the mid cap segment.

"This year our focus is more on mid cap segment where we can do much better. We are envisaging a 8% to 10% loan growth this fiscal which is at the system or just above. We expect to our net interest margin to be as close to 3% as possible and credit cost of max 1% because we have done a lot of proactive provisioning. Housing and retail will continue to to grow faster than the rest," Das said.

He expects corporate loans to grow this year after shrinking last year mainly due to demand from core sectors like steel and cement.

"I expect big bang growth in the construction sector which has forward and backward integrations with as many as 132 sectors which along with the government's push for infrastructure will create a multiplier effect." Das said.

Corporate demand has been muted for the bank as out of the Rs 65,000 cr sanctioned not even half has been utilised.

The bank's board has approved Rs 2500 crore of equity raising but with its capital adequacy at 17% currently, the call to raise more equity will only be taken at the end of September, Das said.

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Six Indian banks sue GVK for Rs 12,114 crore: Report

Six Indian banks are reportedly suing the GVK Group for $1.5 billion or Rs 12,114 crore, according to the Times of India. The six banks include Bank of Baroda, Bank of India, Canara Bank , Icici Bank , Indian Overseas Bank, and Axis Bank.

According to the report, GVK defaulted on a $1-billion loan and a $35-million letter of credit facility given by banks in 2011, and a $160-million loan lent in 2014.

GVK Coal Developers (Singapore) and nine other GVK Group companies are being sued in the case which opens Monday.

As per the banks, GVK failed to make repayments as they fell due and failed to obtain a mining lease in the Alpha project in Queensland, Australia by December 31, 2012, which was a project milestone that had to be satisfied. The banks reportedly asked GVK in November 2020 to cancel the agreement and requested repayment. But neither GVK nor its guarantors has paid any of the sums owed, the banks claimed.

On the other hand, GVK argued that "the loans was to provide part funding for the acquisition of the Hancock companies in Australia to develop their assets — including the Alpha project — into working coal mines".

“The deterioration in the market for coal, the lack of third-party investment, legal challenges to the mining projects in the courts of Queensland, meant that very little progress was made to develop the mining assets,” GVK states. GVK states it could not obtain the mining lease owing to litigation by environmental groups but denies this was a “default”.

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This Indian PSU banks' have exposure to Sintex Industries

Punjab National Bank (PNB) reported yet another scam on Thursday to the tune of Rs 1,203.26 crore. The public sector reported its exposure to Sintex Industries as “fraud”, its exposure to Sintex Industries.

“Pursuant to the applicable provisions of Sebi's Listing Obligations and Disclosure Requirements (LODR) and the bank's policy, "we inform reporting of borrowal fraud of Rs 1,203.26 crore in NPA account of Sintex Industries Ltd (SIL)," PNB said in a regulatory filing.

The fraud reporting pertains to the large corporate branch at Ahmedabad zonal office, it added.

"The fraud of Rs 1,203.26 crore is being reported by bank to RBI in the accounts of the Company (SIL). Bank has already made provisions amounting to Rs 215.21 crore, as per prescribed prudential norms," the PSU bank said in a BSE filing.

This after the stressed textile company said it defaulted on its debt repayment of Rs 49.54 crore to a total of 10 investors. Of this amount, Rs 45.84 crore is the principal amount while the remaining Rs 3.70 crore was the due interest.

Sintex Industries’ total debt stands at Rs 7,358.88 crore. According to a TOI report, the total exposure of public sector banks to Sintex could be as much as Rs 6,000 crore. The banks have already classified the Sintex account as a non-performing asset (NPA) but will now will have to make full provision for the loan within four quarters – which is a requirement account classified as fraud.

According to Brickwork Ratings, at Rs 1,203.26 crore, PNB has the highest exposure to Sintex followed by Bank of Baroda (BoB) at Rs 649 crore, it rises to Rs 949 crore if the exposure of Dena Bank and Vijaya Bank, which merged with BoB, is taken into account. Another PSU bank Union Bank of India has an exposure of Rs 621 crore, including the erstwhile Andhra Bank which was merged into Union Bank followed by Canara Bank (erstwhile Syndicate Bank) at Rs 472 crore, Exim Bank at Rs 416 crore, Punjab & Sindh Bank Rs 333 crore, Andhra Bank Rs 250 crore.

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Bad bank may start with Rs 60K-crore NPAs; govt may put in Rs 10K crore

Banks are likely to move big-ticket bad loans amounting to over Rs 60,000 crore to an asset reconstruction company (ARC), which will focus on turning around non-performing assets (NPAs) and enhancing value. Banks are likely to transfer more stressed assets going forward.

The government could invest up to 50 per cent of the capital in the “bad bank” with a contribution of about Rs 9,000-10,000 crore, said sources.The ARC is expected to take up both old and new cases, bankers said.

Banking lobby group Indian Banks’ Association (IBA) is expected to take the proposal, which is on the lines of the Sashakt panel recommendations, to the finance ministry this week.

The panel had recommended that large bad loans could be resolved under an ARC. The IBA plan envisages setting up of three entities — an ARC, an asset management company (AMC), and an alternative investment fund (AIF) to acquire bad loans from banks with an aim to turn around those assets.

The ARC will acquire and aggregate the asset, the AMC will manage the assets — including takeover of management or restructuring of assets, and the AIF will raise funds and invest into securities floated by the ARC.

The proposed ARC will have to be backed by the government. A similar arrangement was done in the case of IDBI Bank where a stressed assets management fund was created, bankers added. The coronavirus pandemic is expected to result in a rise in NPAs of banks despite steps like allowing a 90-day moratorium on retail loans and relaxing working capital financing norms.

In July 2018 a committee headed by Sunil Mehta, now chairman of YES Bank, had come out with a report on resolution of stressed assets (dubbed as Sashakt panel). It recommended the formation of an independent ARC to acquire bad loans predominantly from public sector banks. The large assets with exposure above Rs 500 crore with potential for turnaround were to be managed by an AMC, while the AIF would raise funds and invest in the securities of the ARC.

The groundwork for forming such a vehicle has been done, keeping in mind the regulatory environment and conditions in financial sector. This would help to reduce response time.

According to a CARE Ratings analysis, gross non-performing assets of commercial banks declined to Rs 9 trillion in December 2019 from Rs 9.7 trillion in December 2018. Public sector banks continued to have the lion’s share (Rs 7.2 trillion in December 2019) of the total NPA pool.

State Bank of India Chairman Rajnish Kumar had said last week this is the right time for a structure along the lines of a bad bank as most banks are holding very high levels of provisioning of NPAs.

Banks have been making hefty provisions for bad loans after asset quality review kicked in 2015-16. As a consequence, the provision coverage ratio of banks has also seen an improvement from 65 per cent in December 2018 to 71.6 per cent in December 2019, reflecting an improvement in the financial health of scheduled commercial banks.

Source- Business Standard

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The Co-op bank crisis: How 1,500+ urban cooperative banks are being run and regulated

The lender, with deposits in excess of Rs 11,000 crore, appears not to have adequately reported the size of its non-performing assets

Last Friday, no one turned up to deliver milk at Avillion Greenfields, a cooperative housing society in Mumbai. The delivery boys were apparently unable to withdraw enough cash from their bank to buy milk supplies.

Their savings are currently stuck at Punjab & Maharashtra Cooperative (PMC) Bank, which has been put under restrictions by the Reserve Bank of India for refusing to recognise its bad loan situation. Withdrawals from bank accounts have been restricted.

It’s not just the milk boys. Raju Agarwal, civil contractor who lives in Avillion Greenfields, has fixed deposits of nearly Rs 50 lakh in the same urban cooperative Bank. Even the two Avillion Greenfields housing societies at Jogeshwari East together have deposits of nearly Rs 3.5-crore in the crisis-hit lender. “Nearly 200 residents in our complex have deposited money in PMC Bank. And for the last few days, there has been a pall of gloom all around,” Agarwal, 57, tells ET Magazine.

The lender, with deposits in excess of Rs 11,000 crore, appears not to have adequately reported the size of its non-performing assets, especially a Rs 2,500 crore exposure to real estate company HDIL Group, which has been taken to the bankruptcy courts by creditors.

Under Lens
The plight of PMC Bank depositors across Maharashtra, Karnataka, Goa, Gujarat, Andhra Pradesh, MP and Delhi and the impunity with which its officials flouted norms raises questions about management of all 1,500-odd urban cooperative banks with total deposits of nearly Rs 4.5 lakh crore.

Urban cooperative banks are divided into two tiers based on their area of operation. While only 31% of them are in tier-2 category, they account for more than 85% of deposits and advances.

Many small cooperative banks and cooperative societies also keep their deposits in large urban cooperative banks. Agarwal says the urban cooperative banks often offer slightly higher interest rates than state-run banks and aggressively seek deposits from housing societies.

“The biggest worry is that this [crisis at PMC Bank] can have a cascading effect,” says Arvind Khaladkar, who during his time as chairman of Pune-based Janata Sahakari Bank, was credited with turning around the cooperative lender.


He says nearly 130 smaller banks have deposits at PMC Bank, and if the lender is unable to return their money, all these small banks will have to mark their deposits as NPAs. “Cooperative banks operate on thin margins and this NPA will mean they will all be in loss, triggering a wider crisis,” the retired banker told ET Magazine.

Demand for Answers
Soon after the RBI appointed an administrator for PMC Bank last Tuesday, angry depositors gathered outside different branches to get their money out. By Thursday, RBI increased the cash withdrawal limit from Rs 1,000 to Rs 10,000.

Meanwhile, several first information reports have been filed against the bank’s top management. On Friday, even as the bank’s deposed managing director Joy Thomas held a press conference in Mumbai, assuring safety of deposits, many of the depositors met near a branch in Andheri to discuss how to bring the management and the board to book.

Lending Mistakes

While all the focus is now on PMC Bank, Khaladkar refers to a larger issue — of how cooperative banks struggle to invest the funds raised as deposits and end up extending risky loans. “At one time, PMC Bank had lower deposits than Janata Sahakari. But they overtook us. When you grow fast, you need to also deploy that cash fast. That is when mistakes happen.”

The bank’s books also show a sudden spurt in term deposits. While its term deposits grew by 11.6% in FY17 and 10.96% in FY18, in FY19, the deposits jumped by 18.9%, crossing Rs 9,325 crore. Thus, the real growth in FY19 was double that of FY18. In this period, the bank’s total deposits grew by 16.89% to Rs 11,617 crore.

Former BJP MP Kirit Somaiya, who first registered a police case against PMC Bank and also met RBI deputy governor NS Vishwanathan over the issue, says: “This is a horrible situation — a clear financial fraud. The main borrower of PMC, HDIL, is already insolvent. There has to be an immediate relief for depositors and rehabilitation for the bank.”

Urban cooperative banks are caught in a time warp, he says. “They have assets like branch networks, but today when banks are going fully online, what is the value of the branches?”

The PMC Bank crisis has also broken out at a time when most cooperative banks and cooperative housing societies are rushing to hold their annual general meetings (AGM) before the September 30 deadline.

Though the AGM of PMC Bank has been postponed amid the ongoing crisis, fireworks are likely at meetings of other urban cooperative banks.

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Why bad loans of public sector banks are down by 10%

1) Why is a 10% fall in bad loans significant?

Bad loans are largely loans that haven’t been repaid for 90 days or more. For the first time in years, bad loans of public sector banks have shrunk year-on-year. For years, they did not recognize bad loans, and postponed recognition by restructuring loans and also by evergreening. It was only in 2013-2014 that these banks started recognizing a few bad loans. This changed further in mid-2015, when RBI launched an asset quality review, following it up with other schemes that forced banks to recognize bad loans. That is why bad loans jumped from ₹2.27 trillion to ₹8.96 trillion between March 2014 and March 2018.

2) Why have bad loans shrunk between March 2018 and March 2019?

Loans that have been bad for four years are dropped from the balance sheet of banks by way of a write-off. This is referred to as a technical write-off and is basically an accounting practice. The central bank defines technical write-offs as bad loans that have been written off at the head office level of the bank but remain as bad loans on the books of branches and, hence, recovery efforts continue at the branch level. A lot of technical write-offs has happened between March 2018 and March 2019, leading to bad loans coming down during that period.

3) What does this mean?

As mentioned earlier, public sector banks started recognizing bad loans nearly four-five years back. In 2018-19, bad loans that had been on the balance sheets of banks for more than four years were automatically written off. The total amount of bad loans written off in 2018-19 was nearly ₹1.97 trillion. Also, the fresh bad loans recognized during the course of the year came down by 45%. This explains why the bad loans of public sector banks have come down. Time is acting as a healer. Primarily, the bad loans have been written off. Over and above this, the recognition of fresh bad loans has come down, which is good news.

4) What about the recovery of bad loans that have been written off?

Given the definition of a technical write-off, loans can be recovered even after they have been written off. Between April 2014 and March 2018, the total amount of loans written off by public sector banks was around₹3.17 trillion. Of this, around 14% was recovered previously. This doesn’t sound good. Hence, a loan, once written off, is as good as one waived off.

5) What’s the big-picture implication?

In the future, as bad loans become over four years old, more such loans will see a technical write-off. If these loans are not recovered, the centre will have to keep investing money in public sector banks to keep them going. In 2017-18 and 2018-19, it invested ₹2.06 trillion. If rates of recovery of loans written off do not improve, a lot more money will be needed to keep recapitalizing these banks.

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Banks has No powers to use Bouncers to Recover Loans

No one has any power to appoint any musclemen or bouncers for recovery of loans forcefully,” Union Minister of State for Finance Anurag Thakur said in the Lok Sabha on Monday.

Thakur said the RBI has issued ‘Guidelines on Fair Practices Code for Lenders’ which are required to be adopted by banks, duly approved by their Board.

“The said circular prohibits lenders from resorting to undue harassment in recovering loans, viz., persistently bothering borrowers at odd hours, use of muscle power for recovery of loans etc,” he said.

The minister said with regard to complaints, the RBI has informed that complaints received by it regarding violation of the said guidelines and abusive practices followed by banks’ recovery agents are viewed seriously.

“In such cases, the RBI can consider banning the bank concerned from engaging recovery agents in a particular area for a specified period.

“In case of persistent breach of above guidelines, the RBI can also consider extending the period or the area where the bank concerned is barred from engaging recovery agents,” he said.

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