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Reserve Bank of India (RBI) has revealed that the top 20 defaulters of public sector banks account for Rs 2.36 lakh crore, or 20%, of total bad loans in India, though it is yet to reveal their names. The total bad loans in the Indian banking system are Rs 10.2 lakh crore as of March 31, 2018.

The RBI data, obtained by DNA Money through the Right to Information Act, shows that the loan exposure is highly concentrated, especially in government-controlled banks.&nbsp;&nbsp;

According to the central bank data, top 20 defaulters of public sector banks have Rs 2.36 lakh crore non-performing assets (NPAs), which is about 50% of the total loan exposure of Rs 4.69 lakh crore to the top 20 borrowers as of fiscal 2018-end.

However, in case of private banks, the defaults by top 20 defaulters are 34% of the loan exposure of Rs 1.31 lakh crore to the top 20 borrowers.

According to Amarjit Chopra, former president of Institute of Chartered Accountants of India (ICAI),&nbsp; the massive concentration of bad loan is the outcome of poor management.

“It reflects poorly on the appraisal system in respect of large projects, particularly infrastructure ones. It may partially be due to other factors like delay in clearances, land acquisition, etc, and to an extent, it may be a reflection on certain undesirable practices in sanction and disbursal of loans,” Chopra told DNA Money.

The RBI data shows that in the last three years, due to the huge bad loan pile-up, the PSU banks have become cautious regarding loan exposure to the top 20 borrowers.

In FY2016, public sector banks have raised exposure to the top 20 borrowers by 18%, but reduced it by 10% in FY2017, followed by a 3% increase in FY 2018. But the private banks have remained robust in their lending to these borrowers. They marked a 13% hike in loan exposure in FY2016 followed by 13% in FY2017 and 21% in FY2018.

NPA hits the banks’ balance-sheets and their business because these banks did not have sufficient capital provisioning against the bad loan. In comparison to developing countries like China and Brazil, India’s net NPA and capital provisioning ratio are very poor.

Recently, RBI deputy governor N S Vishwanathan, in his address at XLRI Jamshedpur, said that Indian banks have a crunch of enough capital in ratio to the current NPA level. “The current levels of provisions maintained by banks may not be enough to cover the expected losses, and hence adequate buffers have to be built into the capital maintained to absorb the expected losses which have not been provided for, if and when they materialise,” Vishwanathan said.&nbsp;

“There are signs of improvement in the default rates and recovery rates after the Insolvency and Bankruptcy Code (IBC) 2016 and RBI’s Revised Framework, which may result in lower unexpected losses for banks in the future,” he said.

&nbsp;According to India Ratings, a Fitch group company, around 45% of total bad loans of Rs 10.2 lakh crore pertaining to the top 500 debt-heavy corporates are likely to be resolved by the end of 2018 under IBC, while the balance is to be decided largely during 2019.

This story first appeared in DNA Money: <a href="https://www.dnaindia.com/business/report-top-20-defaulters-account-for-20-of-total-bad-loans-2688038">Top 20 defaulters account for 20% of total bad loans</a>

&nbsp;

According to the central bank data, top 20 defaulters of public sector banks have Rs 2.36 lakh crore non-performing assets (NPAs), which is about 50% of the total loan exposure of Rs 4.69 lakh crore to the top 20 borrowers as of fiscal 2018-end.&nbsp;However, in case of private banks, the defaults by top 20 defaulters are 34% of the loan exposure of Rs 1.31 lakh crore to the top 20 borrowers.


Bad loans: RBI reveals top 20 defaulters of PSBs account for Rs 2.36 lakh crore 

New Delhi: Private banks may be having a lesser amount of bad loans due to their smaller size in comparison with public sector banks (PSBs), but they have surpassed the latter in bad loan growth by a huge margin. Industry-wise loan data by Reserve Bank of India (RBI) has revealed private banks posted a higher bad loan growth than PSBs in the last five years.

The data accessed by DNA Money through RTI shows private banks have registered high year-on-year bad loan growth rate in 14 industries out of 18 industries, including the infrastructure sector, in the financial year 2018. An analysis of the bad loan data of 18 industries of the last five years - which amounts to 90 instances -&nbsp; private banks registered a&nbsp; bad loan growth in 70 instances and a drop in remaining 20. In comparison, PSBs saw bad loan growth in 75 instances and a fall in 15.

Interestingly, the private sector bad loan growth in the last five years has been higher than PSBs in infrastructure, a critical sector comprising six industries—power, telecom, roads, ports, hospital and construction infra.

In 2014, year-on-year bad loan growth of private banks was almost double that of PSBs in infrastructure sector. Private banks’ bad loans grew 220% as compared to 112% for public sector banks during the year. The private sector has maintained this leap in following years, too.

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In FY15, private banks saw an 87% jump in bad loans, against a 69% rise in PSBs. In 2016, bad loans at private banks grew 216%, while PSBs posted 158% growth. In 2017, bad loans at private banks grew 71% against 10% for PSBs while in 2018, the bad loan growth of private sector in infrastructure was 125% against 121% for PSBs.

Shockingly, private banks’ bad loan spike has been over 1,000% for certain sectors. In petroleum, coal and nuclear sectors, private banks recorded a 1,206% jump in bad loans in fiscal 2018. In comparison, PSBs bad loan in the sector dropped 34% during the year.&nbsp; Private banks’ bad loans in the cement sector grew a 16,585% to Rs 5,637 crore in fiscal 2017 against Rs 34 crore in 2016. PSB bad loans to the sector grew 73% during the year.

The 2017 spike came as private banks had recorded fall in bad loans in 2015 (-32%)&nbsp; and 2016 (-55%). A similar trend has been observed in glass &amp; glassware industry where private banks posted 6,467% growth in bad loans in FY18.&nbsp;&nbsp;

Mining &amp; quarrying, wood and rubber industry too saw big spikes in private banks bad loans.&nbsp; A banking sector expert said the reason for the spurt in private sector bad loans was poor economic performance and pressure from RBI to disclose bad loans.D T Franco, former general secretary, All India Bank Officers’ Confederation, told DNA Money, “Private banks had been hiding bad loans.

Now, they have started disclosing due to fear that delaying NPA classifications will affect recovery. The Reserve Bank of India pressure is also a reason for the disclosure now. With Insolvency and Bankruptcy Code (IBC)&nbsp; and National Company Law Tribunals (NCLT), it is possible to write off without fear of accountability. This helps the bankers as well as defaulters. Hence, they have started showing NPAs in their balance-sheets. Even now, all NPAs are not disclosed, and we don’t have any effective tools for recovery in case of wilful defaults.”

&nbsp;The growth of bad loan in the private sector has a link with the Reserve Bank of InIndia rules issued in February this year.

The central bank has been withdrawn all its existing stressed asset schemes and directed to banks to classify loans where such schemes have been under implementation as non performing assets (NPA).

This article was first published in DNA Money: <a href="https://www.dnaindia.com/business/report-private-banks-beat-public-sector-lenders-in-bad-loan-growth-2685056">Private banks beat public sector lenders in bad loan growth</a>

&nbsp;

Private banks may be having a lesser amount of bad loans due to their smaller size in comparison with public sector banks (PSBs), but they have surpassed the latter in bad loan growth by a huge margin.


Unbelievable! Is your private bank worse than public sector bank? Check shocking truth

This article, first published on October 30,&nbsp;2018 has been updated with the response from Microsoft on November 5, 2018.

Microsoft routinely shared Indian bank customers’ financial details with the US intelligence agencies, a bank document related to Reserve Bank of India (RBI)’s risk observation, seen by DNA Money, reveals. The data of customers running an account with banks that have migrated to Microsoft Office 365 cloud-based email service has been found to have been shared with the US agencies.

Reserve&nbsp; Bank of India has flagged the data sharing by the service provider in its Risk Assessment Report (RAR), which has been placed before the banks’ audit committees for a response.

Customers may not be aware that their financial details are being shared with the US security and intelligence agencies. But Indian banks are fully aware of the development.

According to the response of RBI’s observation, banks know that Microsoft might be sharing their customers’ data to US agencies since they had purchased and migrated to Microsoft’s cloud-based email service - Office 365.

In a specific case, RBI observed in its risk report, “All the mailboxes had been migrated to office 365 Microsoft cloud environment.

It was gathered from the Microsoft transparency hub that Microsoft is bound to share customers’ data under US Foreign Intelligence Surveillance Act (FISA) and US national security letters as and when required by the US authorities.”

According to the RBI observation,submited to an audit committee of a bank, from 2014 to 2016, Microsoft had disclosed information on 3,036 occasions after more than 4,000 government requests or legal demand requests for Indian customers in the US.

Banks have entered into a deal with Microsoft regarding the data sharing of their customers. In response to the RBI risk assessment observation, seen by DNA Money, a bank acknowledged that they have agreed with Microsoft, and according to the deal, Microsoft will only share the bank customers’ data if the order was issued by the government of India or an Indian court.

In the case of the US, the bank responded, “The US government issues gag orders for the same with prior intimation to us. We have incorporated appropriate provision to that effect in the legal agreement.”

More than 100 million people use Office 365 commercial, according to a latest Microsoft report. 
DNA Money asked banks about how many US authorities’ requests have been responded and have been disclosed the Indian customers’ details by your email provider— Microsoft - in the last five years (2014-2018). Several attempts to contact RBI and banks, through email and SMS on the issue did not elicit any response, except from State Bank of India (SBI) and Bank of Baroda.

An SBI spokesperson said, “In 2016 and 2017, Microsoft has advised that they received zero demands from the US law enforcement for commercial enterprise content (50+ seats) located outside the United States. In the first half of 2018, the latest time period for which Microsoft has data available, there was one demand from the US government for content data of a commercial enterprise located outside of the United States and Microsoft notified the customer, which is not SBI.”&nbsp;

On customer data sharing issue, Bank of Baroda said, “Protecting the interests of our esteemed customers is of paramount importance to us. The bank’s ‘systems and operations’ are robust - we stand committed to protecting our customers’ interests, and we have all the necessary systems in place to ensure the same.”

However, a cyber law expert said India needs stringent laws against such practices. Achen Jakher, advocate, Cyber Law, told DNA Money, “Preserving consumer information is extremely important in today’s digital world, especially critical financial information. Intermediary technological firms have to adhere to Supreme Court guidelines to not share data with third parties and not take the data out of the country under any circumstance. Unfortunately, IT companies find multiple loopholes citing technological implementation and flout this rule. It is the need of the hour to come up with stringent laws against such practices. We have to work towards protecting sensitive data of consumers and not share this data for paltry gains.”

Microsoft did not respond to the specific questions, but firmly defended its position on privacy.

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A Microsoft spokesperson told DNA Money, “No government has direct access to any of our users’ data. Data privacy is a top priority for us. We never provide customer data unless we receive a legally valid warrant, order or subpoena about specific accounts or individual identifiers that we have reviewed and consider legally appropriate and consistent with the rule of law and our Microsoft principles. Absent extraordinary circumstances, in the vast majority of cases we redirect governments to seek data directly from commercial customers or to allow us to tell our commercial customers when the government seeks their data.”

Source: DNA Money

Microsoft response&nbsp;

This is with reference to the story published by Zee Business on October 30, 2018, titled “Data breach: Microsoft shared Indian bank customers’ financial details with US intelligence agencies”, referencing an RBI Risk Assessment Report. The story is extremely misleading, factually erroneous and has caused a lot of distress among Microsoft’s employees, partners and customers, in addition to discrediting Microsoft in the country.&nbsp; 
&nbsp; 
We have not been given any opportunity to see or comment on the mentioned RBI risk report.&nbsp; Please review our position on the topic published on the Microsoft India News Center <a href="https://news.microsoft.com/en-in/setting-the-record-straight-on-microsofts-commitment-to-protecting-our-customers-data/">HERE</a> 
&nbsp; 
We would also like to set the record straight and call out the following points in particular:&nbsp; 
&nbsp; 
1. We categorically deny allegations of the report that Microsoft provides the US government – or any government – with unfettered access to data or provides any customer data in contravention of our public statements and clearly articulated principles and contractual obligations. 
&nbsp; 
Microsoft does not provide any government entity anywhere in the world unfettered access to customer data through any means including backdoors in products, special access etc. Microsoft never provides customer data unless we receive a legally valid warrant, order or subpoena about specific accounts or individual identifiers. If data is provided, it is done only after a thorough legal review to check whether the request is appropriate and consistent with the rule of law and Microsoft’s principles.&nbsp; 
&nbsp; 
For commercial customers, absent extraordinary circumstances, Microsoft redirects governments to seek data directly from them and informs the commercial entity when any government seeks its data.&nbsp; 
&nbsp; 
2. The story also mentions a number of alleged disclosures by Microsoft of data of Indian customers in the United States to the US Government, based on RBI’s risk report. These numbers do not match any data available to Microsoft and remain unverified. Microsoft does not record data on the nationality of our customers.&nbsp; 
&nbsp; 
Please also note that Microsoft data centers in India began their operations towards the end of 2015 post which various Indian banks started to consume our cloud services.&nbsp; 
&nbsp; 
Please refer to our <a href="https://blogs.microsoft.com/datalaw/">Data Law</a> site, where we detail everything we have done to protect our customers’&nbsp; data as well as our principles explaining why we go to such lengths to fight for them.&nbsp; 
&nbsp; 
Microsoft India

Reserve&nbsp; Bank of India has flagged the data sharing by the service provider in its Risk Assessment Report (RAR), which has been placed before the banks’ audit committees for a response.


Data breach: Microsoft shared Indian bank customers’ financial details with US intelligence agencies

The Uttar Pradesh Real Estate Regulatory Authority (RERA) is set to allow the defrauded homebuyers to take over and complete a stuck project in Noida. UP RERA took the decision after buyers of Shubhkamna Group’s project in Sector 137 ‘Tech Zone’ approached it, seeking handover of the project to them as one of the developers, Diwakar Sharma ,was behind bars and another partner, Piyush Tiwari, was on the run. The project is almost 80% complete.

After Shubhkamna Tech Homes Buyers Association submitted a proposal for the takeover, the UP RERA asked it to take consent of 60% of the buyers so that this can be considered. A senior UP RERA official said RERA will appoint a financial consultant who will look at the financial viability of the takeover.

“Shubhkamna buyers have approached us, and we will consider appointing a financial consultant if we get a formal proposal from them. We will ask to Noida Authority to advise if they can also join the takeover process,” Balvinder Kumar, member, UP RERA, told DNA Money. A legal expert said it could be a landmark decision and may have an impact across India where a number of projects are stuck and buyers are waiting for possession.

Venket Rao, founder, Intygrat Legal and a RERA expert, told DNA Money, “I believe this is first-of-its-kind initiative under the RERA regime. This will transform the power of buyers and proves the merit of collective action. Section 8 of RERA does provide for takeover by the buyers’ association. Further, in the other matter where takeover of land is contemplated at least, the Authority may examine the possibility of resale, etc.”

UP RERA has received 3,340 complaints about 722 projects in Uttar Pradesh, with 70% of projects being from Noida, Greater Noida and Ghaziabad. Most of the complaints are about delays and fraud by builders.

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According to the real estate consultancy firm Prop Equity, more than 4.65 lakh units of housing projects across India are significantly behind their delivery deadlines. The situation in the National Capital Region (Gurgaon, Noida, Greater Noida, Ghaziabad, Faridabad) is even worse, where 1.80 lakh units valued at Rs 1.22 lakh crore are facing an uncertain future.Mumbai Metropolitan Region (MMR) is the second worst affected region in terms of delayed projects with around 1.05 lakh homebuyers waiting for possession.

UP Real Estate Regulatory Authority has also issued an order in the case of another housing project of Earth Gracia Buildcon Pvt Ltd.&nbsp; Since the project is only 5% complete, it has asked Greater Noida Authority to explore options of selling land and recovering its dues and refunding buyers along with interest.

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In a recent report, property consultant ANAROCK said in the top seven cities, the residential real estate launched in or before 2013 that is stuck in various stages of non-completion are collectively worth Rs 4,64,300 crore for a total of 5,75,900 units that are yet to be delivered to homebuyers.

Anuj Puri, chairman, ANAROCK, said in a report, “This is apart from the other inventory under construction which, judging my visible construction progress, will assuredly get delivered over the next 3-4 years. These 5,75,900 units have been stuck since 2013 or before”.

Source: DNA

The Uttar Pradesh Real Estate Regulatory Authority (RERA) is set to allow the defrauded homebuyers to take over and complete a stuck project in Noida.&nbsp;


Noida property? Troubled homebuyers set to be given this massive power for first time

Independent directors’ fraternity is in a quandary after the Supreme Court order on Tuesday to arrest three Amrpali group directors and seize passports of all the eight directors. Experts said that if the SC order will apply to independent directors, then very few would be willing to join the companies’ Board as an independent director.

A bench of Justices Arun Mishra and U U Lalit gave the direction after taking exception to the Amrapali group not handing over all the documents to forensic auditors. The court said the conduct of the directors was in “gross violation” of its order. The bench issued the notice to 46 companies and their directors asking why contempt proceedings should not be initiated against them.

It noted that as per the two auditors, documents of only two firms - Amrapali Zodiac and Amrapali Princely Estates - were handed over to them. Corporate lawyer Sumit Batra told DNA Money, “Appointment of independent directors is a requirement of law. However, orders being passed by the courts against directors of insolvent companies will surely act as a deterrent for persons accepting appointment as independent directors as it is in a way fastening deemed liability on the entire Board of directors for acts done by promoters.”

The court was hearing a batch of petitions filed by home buyers, seeking possession of around 42,000 flats. “The exposure, accountability and liability for decisions and acts of promoters on independent directors will make things very difficult in future,” Batra said.Independent directors have substantial responsibilities under Companies Act and are part of various committees, including those related to CSR and remuneration.

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&nbsp;“In case, this judgment is to be applied without looking into the case-to-case basis, then professionals will not be willing to join the Boards. And that will be bad for corporate governance,” Amarjit Chopra, former president of the Institute of Chartered Accountants of India (ICAI) told DNA Money.

After this order, independent directors are looking to find out the implication and the extent of liability for the companies where they are sharing Board seat.

Source: DNA

&nbsp;

Independent directors’ fraternity is in a quandary after the Supreme Court order on Tuesday to arrest three&nbsp; Amrpali &nbsp;group directors and seize passports of all the eight directors.


Three Amrapali group directors arrested, fraternity worried 

The vendors of IL&amp;FS have defaulted on Rs 1,000 crore loans and their projects have come to a standstill as the new Board looks to fix things at the troubled shadow bank.&nbsp;More than 200 vendors of IL&amp;FS road construction arms, IL&amp;FS Transportation Network Ltd (ITNL) and IL&amp;FS Engineering &amp; Construction Ltd (IECL), have started defaulting as IL&amp;FS failed to honour the bill discounting agreement with financiers, mostly non-banking finance companies (NBFCs), with the figure now reaching Rs 1,000 crore.

An IL&amp;FS source told DNA Money, “Various road and metro projects run by ITNL and its related companies have been stopped, including Bidar to Humnabad section of NH-50 (Karnataka), Birpur-Bihpur (Bihar), metro projects in Bengaluru, Nagpur Metro rail projects, Gujrat Metro, Kolkata elevated Metro.”

Vendors said that the new government-appointed Board is only focusing on recovering the banks’ money stuck with IL&amp;FS but the situation on the ground is more grave.

A Kolkata-based vendor, who purchased various equipment on loans and arranged the working capital through bill discounting on behalf of IL&amp;FS, told DNA Money, “Everyone is talking about saving IL&amp;FS and the banks’ money. No one is speaking about the vendors who are working for IL&amp;FS. We are in a terrible financial condition and on the verge of bankruptcy.”

Several vendors who executed the groundwork on projects took bill discounting facilities from NBFCs and banks.

Now IL&amp;FS has defaulted on payments to these NBFCs and banks are chasing vendors and threatening to drag them to National Company Law Tribunal for repayments.

Most of these bill of exchange (BoE) loans was disbursed by NBFCs such as L&amp;T Finance and Tata Capital Financial Services.

ITNL, one of the biggest road construction players in IL&amp;FS group, has seen debt grow 1,767% in the last nine years. ITNL defaulted on bill discounting loan to several financial institutions, leaving hundreds of its vendors and scores of their associated small suppliers on the verge of bankruptcy.

NBFC documents, accessed by DNA Money, show, NBFCs are threatening these vendors of dragging them to NCLT, in some cases if they do not repay the money within a week.&nbsp;&nbsp;

An NBFC letter, seen by DNA Money, said, “Even if ITNL and IECL have committed to honour BOEs and to pay the amount due on given date, however as they failed in doing so now vendors have to make payments”.

ITNL and ICEL preferred the bill discounting method over financial closure by banks. Sub-contractors, or vendors, availed loans from their work bill invoices from NBFCs and banks, including L&amp;F Finance, India Factoring and TCFSL by the way of bill of exchanges.

Arvind Kumar Gupta, advocate and vice-president of NCLAT Bar Association, Delhi, said, “It depends on the conditions of the tripartite agreements. If the agreement says that the dues would be repaid only after receiving the said money from IL&amp;FS, then vendors’ interest could be protected. But usually these conditions are not included in such tripartite agreements, and if vendors are also independently liable then they will have to face the insolvency proceeding as a defaulter of financial debt.”

&nbsp;These companies had purchased equipment and machinery for the projects of IL&amp;FS, but since the plans have stopped, their entire equipment and machinery is lying idle, and they are not in a position to repay their loans taken for these pieces of machinery, a vendor said.

Vendors also have issued postdated cheques to the NBFCs, which are threatening of slapping cases along with NCLT if the cheques are dishonoured. DNA Money had earlier reported that ITNL and IECL were accused of wilfully default by Tata Capital Financial Services Ltd due to failure in meeting loan obligation.

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IL&amp;FS Group’s financial position collapsed and its debt service indicators like debt-equity and interest coverage ratio, which show the ability of repayment capacity, gradually worsened. The ripple effects of IL&amp;FS and associates companies’ defaults have been seen on mutual funds, corporate bonds and a sharp sell-off in stock markets.

&nbsp;

Source: DNA Money

ITNL, one of the biggest road construction players in IL&amp;FS group, has seen debt grow 1,767% in the last nine years. ITNL defaulted on bill discounting loan to several financial institutions, leaving hundreds of its vendors and scores of their associated small suppliers on the verge of bankruptcy.


IL&FS vendors on verge of bankruptcy default on Rs 1,000cr loans; new Board looks to fix things 

Complaints made to the Banking Ombudsman, such as cheating and poor service, have seen a massive rise in the last ten years. Most of the grievances relate to issues with ATMs and card transactions. The Reserve Bank of India data, accessed via query under Right to Information Act by DNA Money, reveals that complaints against banking services soared 134% during the last decade. RBI has 21 offices of the specialised grievance body across the country.

Digitisation was supposed to bring more transparency, security and ease of transactions, but the number of complaints against the poor quality of services lodged in a day went up from 132 on an average in 2008 to 309 per day as on March 31, 2018.

A major rise in the complaints was seen after the financial turmoil of 2008 and the demonetisation of 2016.

In 2008-09, the number of complaints received by the ombudsman rose 44% from a year ago. Similarly, in 2016-17, complaints surged over 22%.

During 2009-10, the banking ombudsman received 79,266 complaints as against 69,117 in the previous year, up 15%.

Most of the grievances were related to ATM, credit and debit card issues, followed by failure to meet commitments. However, ATM-related complaints were gradually replaced by failure to meet commitments.

RBI ombudsman report shows that about 18-24% of the complaints are related to ATM in the last ten years.

Last week, State Bank of India reduced the daily withdrawal limit from Rs 40,000 to Rs 20, 000 for on certain cards to curb frauds. The new withdrawal limit will be applicable from October 31.

After a complaint is made to an ombudsman, the banks and the ombudsman decide whether it is valid or not. If the complaint is found to be valid, then the ombudsman starts redressal or award.

The rate of the award is low. Most of the complaints are either rejected or withdrawn. Almost half of 'maintainable' or valid complaints are rejected. In 2007-08, around 40% of complaints were dismissed, followed by 66% in 2008-09 and 32% in 2009-10. In the last three years, more than half of maintainable complaints have been rejected.

The award level in the last ten years is at just around 1% of the valid or maintainable complaints. U S Bhargava, former general manager, Punjab National Bank, told DNA Money, "Partly, the problem could be because of huge retirements at all levels during the past few years in the industry and newly recruited people are not having enough exposure/experience."

The data of annual reports of the banking Ombudsman Schemes of the past ten years, analysed by DNA Money, reveals that the Ombudsman has given 0.4% to 1% reward of total maintainable complaints. For instance, in 2016-2017, Ombudsman Scheme, released by RBI in December 2017, shows the award was given in 31 cases or 0.05% of total maintainable complaints. Out of the total 1,30,987 complaints, 62,539 were found as maintainable at that time.

K C Chakrabarty, former deputy governor and appellate authority of RBI, said, "The speed, cost, convenience and efficiency of banking services have not improved by factors that technology enables one to achieve. A part of the problem is that banks are yet trying out fledgeling delivery models rather than putting in place a cost-effective, decentralised and realistic delivery model. Fixing a problem/glitch when it happens thus becomes the weakest link in providing efficient customer service. A large number of complaints to the Banking Ombudsman relates to this area."

The Reserve Bank of India notified banking Ombudsman Scheme on June 14, 1995. The scheme is administered and funded by the central bank and applies to scheduled commercial banks, scheduled primary urban co-operative banks and the regional rural banks.

Recently, RBI has tightened the rule of the Ombudsman Scheme and asked the banks to appoint an independent internal ombudsman to review customer complaints that are either partly or entirely rejected by the banks.

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...&amp; ANALYSIS 
The number of complaints against the poor quality of services lodged in a day went up from 132 on an average in 2008 to 309 per day as on March 31, 2018

A major rise in the complaints was seen after the financial turmoil of 2008 and the demonetisation of 2016. In 2008-09, it rose 44% from a year ago. Similarly, in 2016-17, there was over 22% surge

Most of the complaints are either rejected or withdrawn. The award level in the last ten years is at just around 1% of the valid or maintainable complaints.

Complaints made to the Banking Ombudsman, such as cheating and poor service, have seen a massive rise in the last ten years. Most of the grievances relate to issues with ATMs and card transactions.


Bank ATM Alert! Credit card, debit card warning! You will be shocked

The responsibility of collapse of IL&amp;FS, one of the largest infrastructure lenders and operators in India, also lies with the Board. The directors of its subsidiary, IL&amp;FS Financial Services (IFIN), overlooked the net negative cash flow of more than Rs 2,000 crore in fiscal 2018, and approved a fat dividend of Rs 130 crore for the shareholders, a DNA Money analysis shows.

Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. A company’s ability to create value for shareholders is determined by its ability to generate positive cash flows.

IFIN’s annual report of 2018 shows that the company was effectively borrowing money to pay its shareholders. After the short amount of time, IFIN defaulted on about five maturities in the commercial paper, the latest on Wednesday - because it had no cash.

IFIN cashflow statement shows that its operating and investing activities are at record negative level, Rs 2,836.16 crore and 917.48 crore, respectively. IFIN also went for the long-term borrowing of Rs 4,025.90 crore.&nbsp;&nbsp;

Under the investing activities head, the company declared about an investment of Rs 826.58 crore to “others” category, which means it invested outside the group. Interestingly, in contrast, IFIN invested only Rs 1.5 crore in own subsidaries, the cashflow statement shows.

An expert said that cash flow is the primary indicator for the Board of directors whether the company will be solvent or not.

Prem Sikka, professor of accounting, University of Sheffield, UK told DNA Money, “A company haemorrhaging cash and paying out dividends is shortening its own life and also damaging suppliers, employees and other stakeholders. It shows executive irresponsibility. It seems to me that this a matter that regulators need to investigate.”

Cashflow statement shows the relationship between net profit from the income statement and the actual change in cash that appears in the company’s bank accounts.

If the company has large negative cashflow then why it allowed such a huge dividend, asked an accounting and the financial investigator. “This is a typical problem with business houses that top executives or promoters are cash rich and live luxurious lifestyles whereas the company has a cashflow problem. The forensic audit, process review and compliance should be the topmost agenda, and independent directors should act more strongly in any such cases,” Sanjay Kaushik, managing director, Netrika Consulting &amp; Investigation, told DNA Money.

IFIN has made various new investments, including Rs 65 crore in Chennai Super Kings Cricket Ltd, a franchise cricket team. These investments are under a specific investment category, where investments are under put and call options with investee company or promoters. In other words, the investor can get in and out as per his wish.

IFIN specialises in infrastructure financing transactions, along with debt syndication. IFIN has also run the international business through its wholly owned subsidiaries such as IL&amp;FS Global Financial Services Pvt Ltd in Singapore, London, Dubai and Hong Kong.

Email and SMSes to IFIN management did not elicit any response till the time of going to press.

IL&amp;FS is looking for the bailout from LIC and SBI, the biggest shareholders of IL&amp;FS and IIFN. Meanwhile, IIFN on Thursday said it has defaulted on seven fresh payment obligations worth Rs 395.46 crore.

Meantime, the Reserve Bank of India has called off a scheduled meeting with shareholders of IL&amp;FS which was scheduled for Friday to discuss the recent set of defaults.

IL&amp;FS’s non-convertible debentures and the commercial paper have been downgraded to junk when IL&amp;FS missed repayment of a corporate loan to Small Industries Development Bank of India Ltd.

Now, all eyes are set on Saturday when shareholders will vote on increasing the authorised share capital of IL&amp;FS to Rs 4,500 crore.

Source: DNA Money

The responsibility of collapse of IL&amp;FS, one of the largest infrastructure lenders and operators in India, also lies with the Board.

&nbsp;


Shocking revelation shows IL&FS borrowed to pay dividend, invested Rs 65 cr in Chennai Super Kings   

Indian businesses are not ready to thwart the growing threat of criminal cyber attacks as more than half of Indian corporates do not have a dedicated staff to handle such attacks, according to the latest report by corporate intelligence firm Netrika Consulting and Investigation.

The report warns, "One cybercrime was reported every 10 minutes in India in 2017, higher than a crime every 12 minutes in 2016".

According to the report, 53% of Indian businesses don't know whom to contact in case they experience a data breach/cyber attack. Only 14% of businesses have the separate department to handle the network security in India whereas 21% rely on the traditional IT department.

The survey cited that about 62% organisations accepted IT breach in the form of virus attack (7%), malware (10%), phishing (19%), ransomware (26%) while 32% have not suffered any breach in the past 12 months.

Most of the businesses (65%) have not conducted information security audits on their vendors or business partners. According to the report, 23% businesses found ransomware attacks as the major security risk, followed by social engineering (12%), insider attacks (14%) and uncontrolled portable devices (12%).

Criminal cyber attacks targeted confidential information of corporates as well as governments bodies.

Sanjay Kaushik, MD, Netrika Consulting and Investigation said, "Companies have realised it is no more an IT problem alone; onus of protecting critical company resources from a cyber-attack is every body's responsibility from basement to boardroom".

In August, cyber criminals hacked the systems of Pune-based Cooperative Bank Ltd, oldest and second biggest cooperative bank in India, and syphoned off a whopping Rs 94.42 crore. Criminal have taken the money and transferred it to foreign and domestic bank accounts across 28 countries over the weekend.

In 2016, about 3.2 million debit cards were compromised of State Bank of India (SBI), HDFC Bank, ICICI Bank, YES Bank and Axis Bank.

"(Because of) the volume and severity of attacks over the past year, organisations are no longer asking if they can be attacked. Instead, they are asking: how they will be attacked. Realising that the perimeter is rapidly weakening, organisations are waking up to a reality where the security battlefield is playing out inside their network", said Madan Mohan, head Information Security Governance and Compliance, Idea Cellular Ltd.

According to the National Crime Reporting Bureau report 2016, Cyber-crimes in India are increasing with compound annual growth rate (CAGR) of 41% during the past five years. Indian Computer Emergency Response Team (CERT-In) said that 53,081 security incidents were handled by the team during the year 2017. These include phishing, scanning or probing, site intrusions, defacements, virus or malicious code, ransomware and denial-of-service attacks.

"Though cybersecurity has started garnering a greater pie of overall budgets year-on-year, India has miles to go in terms of cybersecurity infrastructure preparedness. With attacks getting smarter and more sophisticated, the need of the hour is to set up a more business-focused security architecture and to institutionalize a cyber aware culture, said" Saurab Kaushik, head cyber security, Lupin Limited.

CERT found more than 50% attack were related to website defacements followed by virus and malicious code and network scanning.

According to Internet Security Threat Report, March 2018 (Symantec), India is the second country most affected by cybercrimes after the USA.

Accenture analysed that the average cost of the cyber attack in India was about $1.17 million while ransomware contributed approximately $13,300 to the total cost of cyber-attacks.

Meanwhile, the average global cost of cybercrime was $11.7 million, and is is estimated to reach $2 trillion by 2019, as calculated by Juniper Research.

VERY VULNERABLE

<ul>
	<li>India is the second country most affected by cybercrimes after the US&nbsp;&nbsp;</li>
	<li>Accenture&nbsp; analysed that the average cost of the cyber attack in India was $1.17 million&nbsp;&nbsp;</li>
	<li>Ransomware contributed $13,300 to cost of cyber-attacks</li>
</ul>

Source: DNA Money

Indian businesses are not ready to thwart the growing threat of criminal cyber attacks as more than half of Indian corporates do not have a dedicated staff to handle such attacks, according to the latest report by corporate intelligence firm Netrika Consulting and Investigation.

&nbsp;


Despite SBI, HDFC Bank, ICICI Bank, others data breaches, India Inc not ready fight cyber attacks

Mumbai-based Lodha Group, which is in the process of raising Rs 5,000 crore from the primary market, faces several complaints over its iconic tower ‘World One’, which is being marketed as world’s tallest residential building.

Over the last eight years, the developer has been advertising and selling 117 stories of `World One’ without approval from Airports Authority of India (AAI), a Ministry of Civil Aviation body, which is responsible for height limit near airports.

The height issue has pushed the Lodha project in limbo, and a group of earnest buyers, mostly corporates, have filed cases with Maharashtra Real Estate Regulatory Authority (MahaRERA). A copy of a complaint, seen by DNA Money, alleged that Lodha made “willful attempts to defraud” over unapproved height.

As of now, the project is allowed only 285.09 metres (about 76 stories) but from 2010, Lodha has marketed it as 117 storied structure (423-metre Above Mean Sea Level, or AMSL), which makes it world’s tallest residential building. The group, which collected Rs 1,830 crore from potential buyers as on December 31, 2017, had claimed that the project would be completed by 2018. The group is still waiting for the final approval for the requisite height.

Buyers were also asked to pay for the unapproved height and get handsome returns, DNA Money investigation showed.

In an e-mail response, Lodha, however, told DNA Money that the Delhi High Court had passed a ruling in their favour in 2017, asking the AAI to commission a study by the International Civil Aviation Organisation to grant them the additional height. “Once this process is complete, floors above the current levels will be built, subject to the consent of residents. All relevant disclosures in this regard have been made in the draft red-herring prospectus filed (with the stock market regulator). An iconic development like World One is inspired by global landmarks and continues to bring the best from the world for our customers,” said Lodha.

Documents, accessed by DNA Money, show that the height of this project was not only showcased but also used to get advance money from buyers. The group devised an advance payment scheme “MyGain”, which was linked to the unapproved height level of the tallest tower. Internal communication with buyers revealed that the Lodha and their sales executives lured customers to pay advance money to avail the benefit of “MyGain”. In August 2013, Lodha executives sent an email to buyers, offering more than double return in comparison to fixed deposit and liquid fund. Under the scheme, a buyer had to pay more advance money which was linked to different slab levels including “initiation of RCC for slab 90” and “initiation of RCC for slab 100” and get more returns than FDs.

This offer was beyond the permissible height limit of the project. An attached sheet with the email illustrated how buyers would get a benefit over pre-payment of ongoing instalment. They claimed buyers would get a return of 17.36% (pre-tax) under the Lodha MyGain scheme, which would more than double of prevailing SBI-FD (7.50%) and Taurus liquid fund (8.75%).

“It becomes amply clear that Lodha group made willful attempts to defraud,” a buyer alleged in his complaint to MahaRERA. “Lodha is raising demands when they very well know that requisite statutory permissions for the corresponding milestone payment were not in place,” he said.

Venket Rao, legal expert, Intygrat, said, “The problem stems from the fact that substantial monies could have been collected by the developer without proper approvals in place. Under RERA, a developer is expected to have all the approvals in place before he proceeds for RERA registration and subsequent sale of the units in a project”.

Around June 2010, Shreenivas Cotton Mills Ltd (SCML), a subsidiary of Lodha Group, launched a residential project ‘World One’, in Mumbai’s new business district of Lower Parel. Initially, the group launched two residential towers in the project. One of them ‘World One’ was publicised as ‘world tallest residential tower’ to be built on 18 acre prime land comprising of 117 storeys equivalent to the height of 423 metres. ‘World One’ has been conceptualised as a luxury project loaded with 80,000 sq ft sports arena, 1,000,00 sq ft spa and club and India’s highest public observatory at 1,200 feet. At that time, Lodha assured to customers that project would be completed and delivered in 2015.&nbsp;&nbsp;

The AAI had not given nod to construct beyond 284.29 meters (approximately 76 floors), but they stretched it to the 80th floor in 2015. The group requested AAI to revise the height to 453.29 metre on January 23, 2015. But AAI declined the request. According to the Ministry of Civil Aviation documents, “Applicant (SCML) subsequently, vide letter dated 23.01.2015 had requested again to grant permissible height as per ICAI standards for the iconic tower,” and documents further point out that “the building has already reached height of 80 floors”.

In 2010, AAI had rejected for the grant of height 501.33 metre AMSL and granted a maximum height of 284.29M. In 2015, Lodha had sought review of the issue before the Appellate Committee of the aviation ministry on the revised height of 454.29M. Minutes of the meeting of the Appellate Committee on November 6, 2015, show that the committee had rejected Lodha’s request and granted final height clearance for the only 285.06M.

The committee had granted a minor relaxation in height after considering the aeronautical study report with a warning that “no fresh request to conduct another aeronautical study by International Civil Aviation Organisation (ICAO) will be considered”.

Source: DNA Money

Mumbai-based Lodha Group, which is in the process of raising Rs 5,000 crore from the primary market, faces several complaints&nbsp;over&nbsp;its iconic tower ‘World One’, which is being marketed as world’s tallest residential building.

&nbsp;


Tallest residential tower? Lodha Group made “willful attempts to defraud”

Shivinder Singh has alleged in his petition in National Company Law Tribunal (NCLT) that his brother Malvinder misused the extended inter-corporate deposits (ICD) as a tool in collusion and connivance with Sunil Godhwani, which was contraventions of various laws and "become the key issue for depicting oppression and mismanagement in RHC Holding company".

In a petition, seen by DNA Money, Shivinder Singh had alleged that Malvinder and Godhwani used Religare Enterprises Ltd (REL), a non-banking financial company, to borrow the money from public and "pushed this company into debt trap".

In 2016, Malvinder Singh used his postion and "caused the companies to extend loan in the form of ICD of Fortis Healthcare Ltd (FHL) and use it for the RHC Holding Company. About Rs 473 crore were taken out of FHL and used to pay the lenders of RHC.

Shivinder alleged that the payment did not help RHC instead led to value erosion of wealth and pushed into a debt trap. In 2017, ICDs turned as a hurdle for negotiation.

Shivinder Singh resigned from all the posts of Fortis Health on September 23, 2015, after which he and his wife Aditi Singh joined Radhasoami Satsang Beas (RSSB) at Beas, Punjab, for charitable work.

On behalf of the Religare Finvest Ltd (RFL), an NBFC subsidiary of REL, Sunil Godhwani had created the fixed deposit of approximately Rs 750 crore with Laxmi Vilas Bank on November 19, 2016, against the security of RHC Holdings and its subsidiary Ramchem Pvt Ltd and granted about Rs 750 crore . "This move eroded capital base and loan avail by RHC against the FD, which remain outstanding till date" the petition said.

The first major shock to FHL came in July 2017 after First Gulf Bank had declared RHC and its subsidiaries as a defaulter.

The next major dumping of FHL shares by RHC and its subsidiaries in August 2017 followed by Indiabulls selling the shares. And the fourth dumping took place after Supreme Court Order on August 31, 2017.

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According to petition Malvinder Singh has used Shivinder Singh's wife Aditi Singh forged the signature and shown it during the Board meetings when she was abroad.

Source: DNA Money

In a petition, seen by DNA Money, Shivinder Singh had alleged that Malvinder and Godhwani used Religare Enterprises Ltd (REL), a non-banking financial company, to borrow the money from public and "pushed this company into debt trap".


Shivinder Singh vs Malvinder Singh: This is how company was debt trapped

Ministry of Corporate Affairs (MCA) is looking for a deeper investigation of all firms related to brothers Malvinder and Shivinder Singh - Ranbaxy, Religare and Fortis Healthcare.

“This is not an ordinary case; it seems there are more people involved in a web of transactions,” source privy to the matter told DNA Money. “Initially, Singh Brothers blamed the third person, Sunil Godhwani, and now they are blaming each other, which needs more thorough investigation by Serious Fraud Investigation Office (SFIO),” he said.

SFIO, which is already probing into the affairs of Religare and Fortis, may extend the investigation to other related entities of Singh brothers, including Ranbaxy. The trigger point for further investigation is the recent accusation of Singh brothers.

Former promoter of Fortis Healthcare, Shivinder Singh has moved the National Company Law Tribunal (NCLT) against his elder brother Malvinder over mismanaging the deal and transaction with other entities.

A legal expert said the brothers are trying to divert the attention from the ongoing investigation and the penalty in Ranbaxy-Daiichi Sankyo deal.&nbsp; Corporate lawyer Sumit Batra told DNA Money, “The allegations levelled by Shivinder Singh are very serious, but the timing of such an action, while the Hon’ble High Court of Delhi is coming down sternly on both brothers, is something to be noticed. Further, there are allegations of forging of signatures by Malvinder Mohan Singh, which is a criminal offence, and whether an FIR has been registered or not also remains to be seen.”

“The NCLT is now seized of the matter and the outcome will clarify things in a better perspective.”

SFIO has sent a letter to Religare Enterprises Ltd on February 22, 2018, seeking information for the ongoing probe.

The investigative agency sources said that extensive investigation may focus on the handling of Religare’s NBFC arm-Religare Finvest Ltd’s (RFL) loan businesses. Reserve Bank of India (RBI) has already questioned RFL for illegal exposure to entities connected to the promoters.

On January 27, 2017, RBI had sent a letter to RFL for investigation of a Rs 1,854 crore loan which was disbursed in financial year 2014-15. RBI was not happy the way RFL has sanctioned these loans. RBI said that the accounts of the borrowers were used to route funds to other entities.

In its annual report, Religare Enterprises said that “in the month of July 2018 an inspection was again carried out by the RBI for the records of the company for the 2017-18. The company is yet to receive final reports of RBI”. Sunil Godhwani controlled RHC Holdings, through which brothers Malvinder and Shivinder Singh own shares in Fortis Healthcare and Religare Group companies, and its subsidiaries till 2016.

On Thursday, Shivinder’s counsel requested NCLT to bar any sale of shares in RHC Holdings by Malvinder.

The role of Godhwani and Radha Soami Satsang Beas (RSSB), a religious sect and the management who joined the business with Singh brothers are also on the radar.

The common point of Singh brother and Sunil Godhwani was RSSB. Both have a close relationship with the sect. Godhwani was the financial head and adviser of RSSB.

Godhwani became managing director of Religare Securities on April 15, 2002, and later also held a 1.3% stake in the listed firm Religare Enterprises. Along with Godhwani, other Satsang members, including R K Shetty and Padam Bahl, had joined the Religare Enterprises Board.

Source: DNA Money

Ministry of Corporate Affairs (MCA) is looking for a deeper investigation of all firms related to brothers Malvinder and Shivinder Singh - Ranbaxy, Religare&nbsp;and&nbsp;Fortis Healthcare.

&nbsp;


Big setback for Malvinder and Shivinder Singh in Ranbaxy case   

The road construction companies of the IL&amp;FS group, IL&amp;FS Transportation Networks (ITNL) and IL&amp;FS Engineering &amp; Construction Ltd (IECL), have been accused of wilful default by Tata Capital Financial Services Ltd (TCFSL) due to failure in meeting loan repayment obligation.

On August 9, in a letter to ITNL and ICEL, Tata Finance warned action against the two companies under Insolvency and Bankruptcy Code 2016, if they do not return its money within a week.

In the letter seen by DNA Money, TCFSL said, “The above defaults of you the noticee (ITNL &amp; ICEL) in not making payments against the above mentioned Bill of Exchanges on their respective due dates qualify to be termed as dishonest and wilful default at the very outset, warranting initiation of appropriate proceedings against you the notice (ITNL and ICEL) under the Insolvency and Bankruptcy Code, 2016”.

However, ITNL sources, on the condition of anonymity, told DNA Money that ITNL had made the partial payment on Saturday to avoid NCLT proceedings for a month. ITNL got a contract to build Amravati-Chikli Expressway project in 2015-16 and assigned it to its subsidiary IECL for execution as a contractor. ICEL further sublet this contract and hired four sub-contractors for the project.

In most of the cases, ITNL and ICEL do not avail loan through financial closure from banks, and rather use the bill discounting method. Sub-contractors avail the loan from their work bill invoices. These four sub-contractors availed the loan from different non-banking finance companies and banks, including TCFSL, by way of bills of exchange.

In March 2018, one of the sub-contractors approached TCFSL for a working capital loan against the sales invoice discount, also known as bill discount.

These bills, a kind of collateral, were thoroughly vetted by ITNL and IECL as the bill of exchange against the invoices. TCFSL has given Rs 10.5 crore&nbsp; loan sanction letter to the sub-contractor on the basis of the bill of exchanges.

Both ITNL and ICEL unconditionally accepted to secure the payment if there would be any delay in payment. ITNL issued the letter of comfort dated March 30, 2018, to TCFL and accepted the terms regarding the bill of exchange against the invoice. TCFL had disbursed Rs 8.77 crore against two bills of exchanges, accepted by ITNL and ICEL against the two bills.

On July 2018, ICEL failed to make payment against the bill of exchange. ICEL sent a letter to TCFL saying “unable to make payment” against the bill of exchanges. TCFL took this communication as a violation of undertaking of ITNL and ICEL, which took place on March 30, 2018.

The second bill, which was due on July 21, 2018, also failed. This led TCFSL to take action against the two firms.

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TCFSL has warned in recovery letter that, “if the entire amount as demanded in para 17 of this notice is not paid within seven days to our client, the same shall be considered as “default” and our client shall be constrained to file an application under appropriate provisions of Insolvency and Bankruptcy Code, 2016 for initiation of insolvency resolution/bankruptcy/winding up proceedings against you the notice before appropriate forum/Tribunal/Court”.

Last week ITNL paid some amount to TCFSL and got immunity from insolvency proceedings till September 2018. However, the company source, who did not want to be named, said, “This is not the first time of failure of payment from ITNL. For the last two-and-a-half years, the&nbsp; company is facing several default cases, mostly related to bill discounting loan. Approximately Rs 500 crore of sub-contractors is stuck in this project.”&nbsp;

Several attempts to contact ITNL and ICEL’s top executives through email and SMS did not elicit any response till the time of going to the press.

The source said that various road and metro projects being run by ITNL and its related companies have been terminated, including Rapid Metro Gurgaon (Phase 1), Rapid Metro Gurgaon South (phase 2) has terminated along Kolkata Metro, Kiratpur-Ner Chowk, Khed Sinnar Expressway and MP Border Checkpost Development Company.

Source: DNA Money

The road construction companies of the IL&amp;FS group, IL&amp;FS Transportation Networks (ITNL) and IL&amp;FS Engineering &amp; Construction Ltd (IECL), have been accused of wilful default by Tata Capital Financial Services Ltd (TCFSL) due to failure in meeting loan repayment obligation.

&nbsp;


Tata Capital accuses IL&FS units of ‘wilful default’, makes  Insolvency and Bankruptcy Code threat

Loan disbursals to steel firms by banks have turned negative for the first time since the 2008 economic crisis amid rising hopes of revival seen by Reserve Bank of India (RBI) and rating agencies. The latest RBI data, analysed by DNA Money, shows that annual loan growth for the steel companies fell 6.5% for the 12 months ended June 22, 2018.

The disbursal dropped by Rs 20,800 crore to Rs 3,00,500 crore for the year ended June 22, 2018, against Rs 3,21,300 crore disbursed to the sector in the preceding year. The steel sector has never seen negative loan growth in recent years.

Interestingly, the loan cut comes at a time when RBI sees a rebound in the steel sector.

Its latest Financial Stability Report, released on June 26, 2018, said, “There has been an uptick in capacity utilisation with some industries such as steel closing the gap”.

The credit freeze is even pronounced in the fiscal 2019 data. For the March to June 2018&nbsp; period credit growth to the sector was negative 7.5%, showing that given the high NPAs in the sector, banks have virtually closed their doors for lending to steel companies this year.

However, just last year, the disbursal in 2017 was 4.1% more than in 2016.&nbsp;

In 2015, Indian steel companies had around Rs 3 lakh crore debt on their books, which was almost 15 times consolidated operating profit of the sector. Banks pumped 8.2% more money in 2015 over 2014, which saw disbursals rise 6.4%.

Interestingly, in 2013, when banks had all the reasons to worry about the steel sector, the credit growth in the sector was a record 19.2%.

Steelmakers are complaining that banks are not disbursing even the sanctioned loans.

Rita Singh, chairman, and managing director, Mesco Steel, said, “The&nbsp;banking sector is taking a long time to take decisions regarding companies like ours, which are in Rs 1,000-2,500 crore turnover. We bought a stressed asset in Odisha on the promise that banks will provide us with funds to make the project viable.”

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“We have been paying interest and taxes since last three years on the loans sanctioned to us. But the banks have still not released all the funds, making it difficult for us to keep the plant operationally viable,” Singh said.

Meanwhile, greenshoots are sprouting in the steel sector. On August 11, 2018, RBI analysed the financial performance of 3,096 listed non-government companies and announced the revival of the steel sector.

“The manufacturing sector’s sales growth improved significantly in 2017-18, led by iron and steel,” the central bank said in performance review report of private corporate businesses.

Similarly, India Ratings, the local unit of Fitch Ratings, has estimated that operational performance of steel companies remain active in the remainder of fiscal 2019. “In view of a robust steel consumption demand, aided by government spending on infrastructure and housing and a modest recovery in private capex cycle. A likely improvement in capacity utilisation rates would result in an improvement in operating profitability, due to better absorption of fixed costs, amid steady sales realisations during FY19,” said Prakash P, analyst with India Ratings.

The total exposure of the steel industry stood at about Rs 3.20 lakh crore, out of which gross NPAs were about Rs 1.15 lakh crore (37%) as of 2018.

Top five debt-laden steel companies owe Rs 1.4 lakh crore to banks and currently facing insolvency proceedings.

The steel industry was buffeted by crises after the economic crisis of 2008 when all investment avenues dried up. The government had asked public banks to fund and sustain the core sector of infrastructure. The misuse of funds and global price correction, especially the Chinese low price strategy, pushed the steel sector along with lenders, especially public banks, in trouble. Failure to invest now in steel capacities would result in increasing dependence on imported steel, which will cost more at the time of lower Indian rupee, according to experts.

India has committed to invest about $94 billion in infrastructure in 2020, primarily in the steel sector.

Source: DNA Money

Loan disbursals to steel firms by banks have turned negative for the first time since the 2008 economic crisis amid rising hopes of revival seen by Reserve Bank of India (RBI) and rating agencies.

&nbsp;


In a first since 2008 crisis, disbursals to steel companies drop 6.5%

The common refrain is that the state-owned banks are stodgy and slow-paced under the swelling burden of the bad loans. In contrast, their counterparts in the private sector look unblemished and display a cleaner balance-sheet. But a study by DNA Money based on responses from the Reserve Bank of India (RBI) on RTI queries tells a completely different story: private banks have failed miserably in maintaining the basic parameters of efficiency such as write-off and recovery. They have in fact written off more portions of the toxic loans in their books than their peers in the public sector.

Data available from fiscal 2009-10 reveals that top private banks have managed to put up a neat façade by “cleaning up” their mess every year. Top private banks may have a lesser amount in absolute write-off due to their market size in comparison to the public sector banks, but it is now revealed that they are hurriedly cleaning up their balance-sheets, in order to help them enhance their lending and avail tax incentives.

Obviously, the steep write-off ratio by private banks as well as their recovery rate that is on par with public sector banks have put them in a tight spot when it comes to a debate on the overall efficiency in the banking industry.

Top ten private banks, including ICICI Bank, Axis Bank and HDFC Bank, have written off 28% of their gross bad loans in the last eight years and nine months (starting FY2010 up to December 2017). During the same period, top ten government banks, including State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda, have written off only 14% of the bad loan.

According to RBI data, HDFC Bank has written off almost 50% of their gross NPAs while IndusInd Bank has 41%, followed by Axis Bank (34%) and City Union Bank (29%) during the period beginning FY2010. Among other private banks, ICICI Bank wrote off 23% followed by RBL Bank (21%) and YES Bank (19%).

The government banks hold two-thirds of the banking business in India. The small size of private banks reflects in the absolute write-off amount. Top ten private banks have written off a total of Rs 68, 675 crore against Rs 2.77 lakh crore of the top ten state-owned banks.

A top public banker told DNA Money, “If the write-off rate of private banks is higher than public sector banks and the recovery rate is almost on the same level, then where is the efficiency? It is true that they are growing and capturing public banks’ businesses but they have more holes than public banks.”

The biggest public sector bank, SBI has written off 18% of its bad loans during the period beginning FY2010. Canara Bank has written off 16% of its bad loans followed by PNB with 15% during the same period.

Among the leading public banks, Bank of India has written off 14% of its bad loans followed by IDBI Bank with 14% and Indian Overseas Bank, 13%, respectively.

Barring two banks, Federal Bank and Bank of Baroda, all other banks mentioned in this article did not respond to a detailed questionnaire sent to them on e-mails and text messages.

Ultimately, write-offs are a double whammy for the economy, say accounting experts. Banks usually fail to recover the full amount and the government loses taxes in the process. Amarjeet Chopra, former president of the Institute of Chartered Accountants of India (ICAI), the accounting regulator body in India, says, “There is a need to lay down guidelines on bad loan write-off for three reasons. Firstly, no account should be written off, even technically, without making adequate efforts for either rehabilitating the accounts or making recoveries in accounts. Secondly, there is no undue benefit derived in the form of lower tax liability by way of these write-offs without making any efforts. Thirdly, it enables the banks to show lower gross NPAs.”

Sumit K Batra, a corporate lawyer, says that both public sector and private banks use write-offs to remove loans from their balance sheets and reduce their overall tax liability. “Unlike public sector banks which get adequate support from the government, private banks opt for a higher write-off rate in order to attract investments and avoid scrutiny and cover up the actual deficit.”

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Recovery hits a bumpy road 
Private banks have recovered a total of Rs 47,868 crore, making it around 69% of the write-off amount during the past eight years and nine months. Public sector banks have also managed to recover at a similar rate — about 68% of their write-off amount that amounts to Rs 1,89,605 crore since FY2010.

Data, however, shows that private banks’ recovery rate dropped below that of public sector banks post 2012 fiscal.

Among private banks, Federal Bank has shown the highest recovery rate of 154%, followed by RBL (153% of total write-off), South Indian Bank (140%) and Kotak Mahindra Bank (107%), respectively.

In FY2018, YES Bank had shown a massive 385% jump thanks to Rs 3,141 crore recovery against Rs 470 crore write-off.

The second biggest private bank, ICICI Bank, has been able to recover 60% (Rs 18,196 crore) of its write-off followed by HDFC Bank with 56% (Rs 8,653 crore), and Axis Bank, 47% (Rs&nbsp; 8,441 crore).

Banks always claim that the write-off does not mean a waiver. They claim that it is a technical write-off which entails 100% provisioning beforehand and trims the balance-sheet.

Ashutosh Khajuria, executive director and CFO, Federal Bank, told DNA Money, “The resolution process continues in most of these cases, including the legal action and recovery proceedings. The recovery post ‘technical write-off’ is credited to the profit &amp; loss (P&amp;L) account, subject to an equal tax payment. The process helps in removing the dead assets from the balance-sheet so that it does not appear inflated unnecessarily with a dump of unproductive assets, after being duly (100%) provided for as a charge to the profits. Our bank periodically reviews such accounts closely and decides on this action”.

Provision coverage ratio 
Ideally, banks recognise their lousy loans and put some money aside against the risk of a default. A bank declares such loan accounts as sub-standard and keeps 15% of the defaulted amount as provision if the default period is three to six months. This provision amount increases with the default period. For six to twelve months, this amount rises to 25%. Similarly, for one to three years, the amount will be 40% of the default amount. If that account has defaulted for more than three years, the bank provides for 100%.

To reduce the bad loan risk, the Reserve Bank of India (RBI) came out with a guideline of Provision Coverage Ratio (PCR) in 2015. According to the PCR guidelines, banks have to maintain at least 75% of the provision amount, but most banks fail to keep this minimum criteria.

Now, banks have begun to manipulate the financial numbers to show less bad loan in order to keep a low provision in the books. To show their book cleaner, banks are tweaking their numbers.

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Are private banks hiding something? 
Divergence is a dirty word for bankers. Banks don’t want to recognise some loan accounts as non-performing assets (NPAs), but RBI says they have to recognise it. RBI has noticed that many banks are hiding bad loans and provisioning amounts to make their balance-sheets look smart and clean. The central bank’s re-audit has thrown up several anomalies and window-dressing in gross and net NPAs, and provisioning.

Some banks have been dishonest to customers and investors while revealing their financial numbers. RBI has caught some of them red-handed while re-auditing their financial results. The re-audit findings, known as divergence, have to be disclosed by respective banks in their annual statements.

In FY 2018, 23 banks have declared their divergence numbers. These banks managed to hide 17% (Rs 81,856 crore) of 17% (Rs 81,856 crore) of gross NPAs, 21% net NPAs (Rs 54,640 crore) and 13% (Rs 28,060 crore) of provisioning amount. Four private banks, YES Bank, HDFC Bank, IndusInd Bank and Karnataka Bank top the RBI's divergence list.

Public sector banks are claiming to strengthen their recovery mechanism. Sameer Narang, chief economist, Bank of Baroda, said, "We try to recover dues from the defaulted borrowers through all the available recovery mechanisms like a regular follow-up, Sarfaesi Action, legal recourse, Lok Adalat, Compromise Settlement, etc. and write-off is the last resort after exhausting all recovery measures."

Write-offs are "good" for the bank in the sense that they reduce NPAs but also reduce banks' profit, says Deepak Shenoy, founder and CEO, Capital Mind, a financial analytics company. Banks effectively take the loss where it is not recoverable. "They are in fact hoping that they can recover it but eventually realise that they can't," he adds.

The RBI data, accessed through RTI queries by DNA Money, reveals that private banks have written off 28% of their gross bad loans as compared to 14% of public sectors banks since 2009-10.

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Dipu Rai