In recent years, the real estate market
has helped increase realty frauds and other phony real estate financing by the
Banks. The recessionary trend in present realty scenario invariably has brought
in many unscrupulous and unsavory Builders/Developers who, in connivance with
certain corrupt Bank Executives and dishonest officers, secure bogus loans by
allegedly executing spurious documents supported by fudged Balance Sheets,
highly inflated/false data, fabricated information/statements and try to make
some fast money through illegal routes.
Builder - Advocate - Chartered
Accountant - Bank Executives - Branch Managers/officers nexus is believed to be
the root cause of Banks falling prey to realty frauds involving non-viable
loans in multi-crore of rupees resulting in many fold increase in
non-performing assets of Banks. Quite a number of times, the approvals come
from a single branch of a Bank for sanction of loan to a blue-eyed
Builders/Developers of that Bank, are the results of lack of any thorough
scrutiny of the project by the Bank officials.
It is worthwhile to point here that
even Banks are under pressure to disburse maximum amount of loans to reach the
given targets as per directives from various authorities and consequently, some
of them conveniently skip the required in-depth scrutiny for sanction of loans.
Banks are supposed to be more vigilant
and enforce appropriate due diligence before sanctioning loans to the
unscrupulous Builders/Developers. Bank Officials hand in hand for occasional
pecuniary benefits, later face the music of investigation against them for
Realty frauds front also because of the dereliction of duty by some advocates
and chartered accountants. When a fraud comes to light, Bank Officials are either
charge sheeted or summarily dismissed or put behind bars. However, no action is
taken against the top executives of the Bank or the professionals hired by the
Builders/Developers.
It has also been noticed where a Bank
Manager is transferred or posted from one branch to another, such immoral
clients follow these Bank executives to continue their illicit relations to avail
more and more loans in multi-crore of rupees which are sanctioned or got
sanctioned from HO by such dishonest Bank Managers who act as carriers for
the top bosses of that Bank.
Complaints about mortgage frauds and
predatory lending practices in Banks have also grown many-fold as the economy
has soured and increasing numbers of Realtors face financial strains and even
foreclosure. Reserve Bank is taking mortgage frauds seriously with assigning
the task of investigations and prosecutions to the Central Bureau of
Investigation Dept. and Banking Section of Economic Offence Division against
the corrupt Bank executives and dishonest Bank Officials for rendering undue favours
to the Builders/Developers and acquiring disproportionate Assets to their
salaried income.
There are numerous cases registered by
Central Bureau of Investigation Dept. and Banking Section of Economic Offence
Wing against the erring Bank executives/Managers for abusing their official
positions and entering into a criminal conspiracy and fraudulently sanctioning
and disbursing various limits to the Builders/Developers on the basis of false
and forged balance sheets thereby causing loss to the tune of multi-crore of
rupees to their Banks.
There are umpteen numbers of such
realty frauds with height of violation of the ground rules and guidelines of
Credit Policies framed by the RBI where the project loans in crore of rupees
have been disbursed without proper assessments, without adherence of sanction
norms, with no proper verification of genuineness of title documents/balance
sheets/data/projections and ignoring the viability guidelines of the Bank.
Banks have begun stress testing their
realty assets as delinquencies in loan service payments begin mounting up and
are now asking the Builders/Developers to lower prices to clear their piled-up
Realty NPAs. Additionally, The Banks are reducing the moratorium period on loan
repayment from 9-12 months earlier to just three months now as many banks have
begun facing overdue on some of the past realty loans. This puts an indirect
pressure on the Builders/Developers to sell off their projects quickly to
start repaying their installments in default.
Distress sales have increased. Some
Builders/Developers are resorting to discounted sales with attractive gifts for
meeting liquidity requirements. Analysts have expressed concerns over the
financial health of the Real Estate Sector. City-based retail broking firm,
India Infoline, fears the liquidity situation of Builders/Developers could
worsen further if banks refuse to refinance maturing debts of Real Estate
Companies and maintain the credit freeze on their accounts.
Bankers are resorting to moral suasion,
persuading borrowers to settle their overdue payments. However, despite such
efforts, RBI said that subsequent to the AQR, gross NPAs rose 79.7 per
cent year-on-year in March 2016. The net NPA of
the Banks also increased sharply to 4.6 per cent in March 2016 from
2.8 per cent in September 2015. Public Sector Banks' net NPA was
6.1 per cent while the ratio for Private Sector Banks was 4.6 per cent.
For the last financial year, the average was about 2.5 per cent of advances.
Natural justice demands that disciplinary actions must be initiated to book the
erring officials of the Banks in an expeditious manner.
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