Sunday, February 24, 2013

BL New Banks ; ICL RBI moves to allow, BANKS for Realty - 'ring fencing', so on


BL debt recovery tribunals to waivers to asset reconstruction companies to debt restructuring, practically every solution in the book has been tried to tame bad loans. And yet they continue to rise. NS Vageesh looks at the genesis of the problem and the way forward. »

Property prices cool, but home rents heat up prices have cooled down significantly in the last one year. So, has this led to a lower rental bill for tenants? No, rents in most cities have increased in the last 12 months, with some localities even witnessing hikes of up to 20 per cent. »

How NBFCs rein in their bad debts

The economic slowdown has meant that non-performing loans of both deposit-taking and non-deposit-taking Non-Banking Financial Companies (NBFCs) have shot up over the past two years. But discipl... »

The borrower’s perspective

The regulatory environment has impacted cash flows and ability to service debt »


After a lapse of nearly 2 years, because of the increasingly disparaging personal experience with banks, to be precise with so called PSBs/ branches in locations like Mumbai, and having been pushed almost to own wits’ end, one was obliged / perforce driven to have a relook at the longish master circular from the RBI.

Of course, the RBI, as the apex bank, more so as the regulatory authority with direct responsibility and exclusive control, has been, as a matter of routine, issuing such circulars or directives, etc., from time to time, stressing unequivocally, among others, why the most important aspect of all, for banks to ensure, is the so- dubbed ‘customer satisfaction’. Whatever that means or was intended to mean, as any other ideology, has only remained on paper. What has been persistently happening in the field is just the contrary. Mostly, at the end of the day, a majority of customers/account holders are left a helpless and highly dissatisfied lot, being faced with an overwhelmingly suppressed and miserable feeling, verging on growing mistrust and unsatisfactory service of the highest order. What else can be the root cause- except the wanting of wish and will to monitor !

No need to specially add, -it is high time that the RBI, so also the concerned managements, pull up their socks, take a serious note of the increasing deterioration in the quality of service, and come out, on a war footing, with truly effective remedial measures. Failing which, there is no gainsaying that, the banking sector is bound to jump on the bandwagon, for joining the other one, in a way connected and related, commonly known for its notoriety, i.e. the realty sector, which admittedly has continued to remain for long an extremely 'unorganised', ‘unregulated’ sector, with the RBI pushed to a mere figurehead.

Setting up a new bank? Pause and proceed

Ref. "The ‘feel good’ in business circles, especially considering that the RBI has allowed applications from quarters that were speculated to be possibly excluded, is clearly visible and understandable. The fact that the RBI has indicated a meaningful timeline and evaluation process is equally welcome"

Reaction: The impression given that applications for licences have been,- "allowed" , so far as one knows, does not seem to be factually correct; at best a speculation.

The write-up could have been more specific on, what exactly are the 'quarters' referred to!

Random thoughts:
In the write-up no focussed mention has been made of the ‘realty sector’, unwittingly or otherwise.  None concerned, directly or indirectly, could afford to be oblivious of the idea of 'owner-financing' that has been slowly but notably catching up and gaining momentum in very recent times in the realty sector. 
The newly mooted banking stream , in the interests of all concerned, especially to protect  the interests of the PSBs, and in turn it’s stakeholders, so also the buyers’ community,  needs to be implemented and licences  granted, with the main focus on those sectors such as 'realty sector' , which for long, on their own admission,  have remained highly 'unregulated’ , hence with inherent ‘risk potentials’ confronting the nation’s economy as a whole.

For an insightful study of the concept of 'self-financing', the following may be read >

  1. What is Self-financing? definition and meaning
    Definition of self-financing: nounthe process in which a company finances a project or ...the company is completely self-financing ... Popular 'Banking' Terms ...
  2. What is Self-financed? definition and meaning
    Definition of self-financed: adjectiveUsagethe project is completely self-financedthe project ... the project is completely self-financed ... Popular 'Banking' Terms ...
  3. What Does Owner Financing Mean? | › Real Estate & Investment
    This means that the owner is acting like a bank by lending the purchaser all or a portion... but you can always request not to pay points on a self-financed property. ... Owner financing is a term used to describe owner participation in financing a ...
  4. Debt Financing Vs. Equity Financing
    There are three alternatives for financing a business, namely, self financing, equity financing and ... Debt financing means when a business owner, in order to raise finance, borrows money from some other source, such as a bank. ... or in accordance with the terms and conditions set between him and the business owner.

The mooted idea , though prima facie made to appear a straightforward one, with an objectively well-thought-out outlook, a reading of the revealations of certain not so obvious, if not hidden, facets of the new scheme  have been brought to focus through an analysis in-depth in the write-up @the link below: 

The point calling for a special noting is that, after all, just as most of the other SEBI formulated rules, the subject rules riddled with glaring complexities and impediments rendering , in the ultimate analysis, the norms for approval a highly subjective exercise.

RBI Guidelines for Licensing of New Private Sector Banks
<> It is recalled, PC, the FM in his initial public announcement of such a proposal indicated to the effect that the novel idea  should enable the realty sector to have its financing needs met by an exclusive wing of banking sector, divorced from the extant banking system. Be that as it may, the RBI’s follow-up move, if properly designed, implemented and gone ahead, with a sincerity of its laudable purpose, in a common man’s perspective, should help the PSBCs in being insulated to a great extent from the worrisome ‘risks’ and the resultant ‘NPAs’ thus far faced by them.

No need to specially say, - Over to concerned experts for matured thoughts and suggestions. 

Key Note:

Reflecting for a moment, the newly announced scheme, seems to have a close semblance of the other already extant so-called 'self-financing' schemes. May be, is traceable to the ideally mooted concept of, employees-owned-managed companies, experimented not in the very distant past. There is no knowing why, and what exactly were the reasons,for it not having been successfully pursued !   

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