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Nationalised banks' non-performing assets shoot up to R2,16,739 crore

akhilesh yadav

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akhilesh yadav

According to the Reserve Bank of India (RBI), its non-performing assets of nationalized banks has swelled from Rs9,190 crore in 2011-12 to Rs2,16,739 crore in 2013-14.



The statistics were provided by the RBI to former journalist Ketan Tirodkar under the Right to Information Act (RTI). Tirodkar has filed a public interest litigation in the Bombay high court seeking that the Central Bureau of Investigation (CBI) be directed to conduct a probe in the NPA scams.



Read at: Nationalised banks' non-performing assets shoot up to R2,16,739 crore | Latest News & Updates at Daily News & Analysis

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Prasad GLN

The information should have been comprehensive if it is revealed about percentage in total advances, individual Bank performances and only on Doubtful and loss assets only. Infact Banks must upload top 100 defaulters and amounts in their websites.

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Bank of Maharashtra's major defaulter is a Surat fleet operator





Since the last one year, the Reserve Bank of India (RBI) has declared a war against willful defaulters.


In his speech, RBI Governor Raghuram Rajan made it clear that there cannot be successful promoters despite failed companies and they have no "divine right" to manage their failed companies.


Today, as per RBI data, the non-performing assets (NPA) of the nationalised banks have increased by several times.


It was Rs.455 crore in March 2008, Rs.486 crore in March 2009, Rs.1,570 crore in March 2010, Rs.1,939 crore in March 2011 and Rs.9,190 crore in March 2012.


Shockingly, now the NPA has increased from Rs.9,190 crore in 2011-2012 to Rs.2,16,739 crore in 2013-14.


Ketan Tirodkar from Mumbai obtained the latest data from the central bank under the Right of Information (RTI) Act.


Indiatoday.in has the RTI reply copy, in which RBI has said, "The information regarding estimated NPAs is not available with this department. The gross NPAs of Public Sector Banks as on March 31, 2014 is Rs.2,16,739 crore."


In every credit policy, the RBI governor says there are financial entities capable of cleaning up their finances but still deal with bad loans - so it is extremely important for bankers to clean up their balance sheets.


One such financial entity is Siddhi Vinayak Logistics Ltd (SVLL). In Surat, SVLL claims to be one of the fastest growing road transportation companies. It claims to have a branch network all over India with fleet of more than 5,875 pre-owned vehicles.


In 2012, SVLL launched its corporate responsibility scheme called Chalak Se Malak to help drivers (by making them equity shareholders). The same year, SVLL captured headlines by placing its largest order to Tata Motors of 1,314 M & HCV trucks. The value of the order was estimated to be around Rs.225 crore.


Under the Chalak Se Malak scheme, SVLL took crores of rupees as loan from the Bank of Maharashtra (BoM).


The portfolio documents with BoM dated December 31, 2012 (available with IndiaToday.in) points out "to reward the loyalty of hundreds of truck drivers employed with SVLL under this scheme, the company would sell its used trucks to the drivers at mutually agreed fair prices based on valuation. Later, the driver will operate the truck as his own, but continues to have it deployed with SVLL as a subcontractor. Out of the bills payable to the driver-cum-owner, SVLL will deduct the installments on account of price of the truck. On full payment, the truck would be transferred in the name of the driver. During the period of such payment, the loans availed by the company (SVLL) from various lenders would continue."


After due discussion, BoM formulated a pattern on the lines of the bank's scheme for financing Small Road Transport Operator (SRTOs) and issued loans in crores of rupees with various concessions such as concession of 0.5 per cent in the processing fee, deviation in age limit of the truck to be considered on a case-to-case basis and margin to be kept as under 30 per cent for less trucks aged less than four years, 35 per cent for trucks aged four years and 40 per cent for trucks aged five years.


What were the advantages to the bank? Bank officials assured its management that all advances will be classified under priority sector (about Rs.100 crore), all advances will be covered under CGTMSE, and around 20 per cent advances may be classified under weaker sector and assured repayment through SVLL linkage.


But nothing as such happened. In 2015, bank officials of BoM are struggling to get their money back from SVLL.


Pune branch offices of BoM played a major role. Specifically, one indirect term loan to drivers was given from Model Colony Branch, Pune, to 500 accounts of Rs.100 crore, and another indirect term loan to various drivers was given from Deccan Gymkhana, Pune, to 2,375 accounts of Rs.652 crore.


Documents available with IndiaToday.in shows that by May 2014, BoM had direct exposure to the group companies of SVLL of Rs.259 crore, and its indirect exposure to the group by way of above SRTO finances were Rs.645 crore.


One document says: "Total direct and indirect exposure to SVLL group of companies (12-13 companies) was Rs.1047.19 crore."


Moreover, various irregularities were found while issuing these direct and indirect finances to SVLL by the banking officials of BoM.


The observation made in its internal probe says, "The huge exposure taken by the zonal authorities were without express consent by Head Office, violating its own credit policy about the exposure to the group defined under credit policy approved by the board."


The group companies of SVLL were allowed to resort to double financing, diversification of funds, shifting the liabilities in the company's balance sheet to the individual drivers and windfall gain to the top executives of the bank with the collusion of the directors.


"The finance made without considering the basic principles of lending, flouting RBI guidelines and credit policy of the bank," the report said.


Sources say SVLL submitted bogus applications of drivers to avail such loans. Strictly confidential communication between BoM's Ring Road Branch in Surat to Ahmedabad Zonal Manager dated March 26, 2014, has exposed the fraudulent face of SVLL. The communication copy is with IndiaToday.in.


The letter highlights how SVLL did not provide a documentary proof of Provident Fund (PF) in support of their claim that the applicant drivers are permanent employee or not, how 99 of 100 applicants, named by SVLL, had availed loans from Corporation Bank under Chalak to Malak scheme as well and how SVLL submitted bogus documents in the name of Ashok Leyland.


The communication said: "It has been transpired that no such company (Addplus Distributors Pvt Ltd - Ashok Leyland dealer) or its office exists at Silvassa. It has been observed that the quotation does not have VAT/CST registration number. It is further observed that the quotation of chassis body building appears to be inflated."


The chief manager of Surat Branch says this to his Zonal Manager in Ahmedabad: "Considering the above facts, we recommend rejection of all 100 loan applications received under Chalak to Malak Scheme immediately. It is further recommended that we may not evince interest in the captioned scheme of the SVLL in future."


Interestingly, the senior officials were aware of the present status of this portfolio but still did not declared it as a NPA - which is expected now by March 31, 2015. Source says avoidance of marking NPA of these accounts is being done with an intension to keep these accounts out of preview of investigation for specific period of time and avoiding legal action by the bank.


IndiaToday.in shot detailed queries to Chairman and Managing Director of Bank of Maharashtra Sushil Muhnot. After three days, the bank's spokesperson replied in an email statement: "As a matter of policy, Bank gives views & responses publically on the policy matters and not on the points related to any individual accounts, which involve commercial confidence."


On recovery aspect, BoM sources told IndiaToday.in that "whenever bank officials communicated or met with SVLL management, they have been saying, we are not running away anywhere, we will return your money soon. In fact, SVLL's senior officials always boost off of having political linkages with state's ruling party and some senior leaders."


IndiaToday.in also came to know that SVLL has been one of the major suppliers of LED trucks and other logistics to selected political parties during election campaigns.


According to the bankers, the finance related to old trucks was credited in the company accounts. These trucks were already financed by other PSU/private banks in the name of drivers/SVLL, indicating another refinancing.


As these old trucks were already financed by PSU banks, takeover norms should have been applied. The disbursement should have been made directly to PSU banks. "No dues" certificate must have been obtained from the respective PSU/private banks. All these were not done and hence end use of funds disbursed is not known, completely.


In some cases, the finance for the new trucks was made directly to the dealers of the trucks (Tata and Ashok Leyland). Out of the total finance for the purchases of chassis of the new trucks, more than Rs.150 crore was disbursed through RTGS/NEFT or credited in the account of Addplus Distributors Pvt with Bank of Baroda, Surat Branch, between February 2014 and March 2014.


Source says immediately after credit in Addplus Distributors Pvt Ltd, the disbursed amount was transferred to PR Niryat Pvt Ltd with an account at the same branch. The payment was made to Addplus Distributors for the chassis of the trucks which has claimed to be distributor of Ashok Leyland.

"However, there were no details mentioned in the quotation except an open plot at Silvassa. The directors of these companies are reportedly associated with SVLL indicating another nexus for vested interests of all involved parties," a BoM source said.


Moreover, about Rs.120 crore was disbursed for body building of the trucks at the same time and without ensuring the delivery of chassis.

This payment was made to Advance Metal Corporation. "This company is not dealing with the body building business at all. Again, end use of bank funds is in question," source said.


SVLL declined to reply IndiaToday.in's detailed queries in this case along with questions on its political linkages.

After taking three days to think over it, the company's PR official said: "SVLL would like to remain low profile at this stage. According to them, all these are speculative reports."


Read more at: Bank of Maharashtra's major defaulter is a Surat fleet operator : Business, News - India Today

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The information should have been comprehensive if it is revealed about percentage in total advances, individual Bank performances and only on Doubtful and loss assets only. Infact Banks must upload top 100 defaulters and amounts in their websites.


Some of the data is available in these two articles:























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Prasad GLN

The increase in amount of NPA is due to increase of credit. However the total NPAs in total advances was 5.34% and that has drastically reduced in a decade to 4.39% (2013-14) and hence the position is not that much alarming as in every advance there is risk involved.

However the Banks are intelligent in window dressing, at the fag end of year to reduce the total advances they lead heavy amounts through bill discounting and show advances higher to show NPA % lower.

To state in lay man's language out of Rs.100/- advanced by Banks only Rs.4.39 may not be recoverable and bank can sustain and keep margin upto Rs.6.50 not recoverable. The amount may be substantial but it should be compared with total amount advanced.

Though the amount of advances increased over a decade, bad debts are in decreasing trend.

Once the real estate prices shoot, even the recovery position may improve, if Banks take appropriate measures in time through Debt Recovery Tribunal.

To cite an example in Worli, Mumbai in 1975 a bank has advanced Rs.1 lakh and could not recover any rupee, but in 1998 as real estates prices escalated, it could recover more than Rs.5 lakh as a suit was filed and company could not dispose the real estate without clearing bank debt.

Why there is spurt in only one year so suddenly in 2011-12 has to be studied in proper perspective. It may be due to strict directives and supervision by RBI in strictly implementing classification. Many Banks hitherto managed to suppress actual NPAs but once RBI has passed strict guidelines, they are falling in line and the spurt may be due to this factor.

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