HORROR OF HOUSING LOANS IN INDIA
After repaying Rs. 1.63 Crores, the amount due is Rs. 1.66 Crore, on a housing loan of Rs. 1.51 Crore
A large multinational bank issues a housing loan of Rs. 1.5 Crore in the year 2008
The borrower repays about Rs. 30 Lacs over a period of about one and a half years. The complete amount is amortized by the bank purely towards Pre-EMI interest. The borrower who is tired of requesting the bank to convert the Pre-EMI installments to EMI, stops paying installments to the bank in the year 2010
The bank goes through the motions as per SARFAESI Act and tries to auction the property. The excuse being, EMI to Pre-EMI conversion request needs to be in writing by the borrower
The borrower approaches The Honorable DRT and is granted an unconditional Stay against the auction of the property by the bank
PLAYING WITH THE RULES
Under SARFAESI Act, permission to take possession and to auction secured property can be granted by The Debt Recovery Tribunal or by The Deputy Commissioner to the bank after the concerned Authority vacates the Stay.
When the Stay by The DRT is in force, the bank clandestinely obtains an order from The Deputy Commissioner’s office. This is done by suppressing the existence of the Stay by The DRT. The DC permits the bank to go ahead with the auction process. Meanwhile, the borrower is waiting for proceedings in The DRT while the bank goes ahead, takes over physical possession of the property and proceeds with the auction formalities
NOWHERE TO TURN
The borrower having nowhere to turn to, agrees to the banks demand to pay an additional Rs 15 Lac towards Pre-EMI, and the bank returns the property. With this the borrower has paid about Rs. 48 Lacs towards Pre-EMI interest between the years 2008 and 2010
GAMES OF MERGERS AND ACQUISITIONS
EMI now commences, but the large multinational bank sells off its “Housing Division Vertical” to a Non Banking Financial Institution and ownership of this housing loan division goes through more mergers and acquisitions over the next couple of years. Who is to be held responsible for what portions of omissions and commissions is now muddled. Writing to the large multinational only leads to shifting of the responsibility.
DIE ANOTHER DAY
The borrower enters into a distress sale with the first person who is willing to close the housing loan for the prime property, at a small portion of its market value.
The borrower has repaid the loan and the bank/NBFI has recovered the “SO CALLED DEBT”. Amount repaid is a total of Rs. 3,28,90,105 on a loan of Rs. 1.5 Crores across about 5 years.
SILENCE OF THE LAMBS
The Honorable DRT has been created with the purpose of helping banks to recover genuine bad loans.
But in India, private/multinational banks and NBFCs have created methods in which the cow is milked, slaughtered, consumed as delicate veal and skinned for its leather, even before it transforms into a cow from a calf.
Every nook and corner of Indian towns and cities have plenty of variations of such gory tales. And now our new Government at the centre is planning to issue banking licenses to many more private entities. This time around these new banks are expected to address rural India and small customers. Will meaning policies be framed before these new licenses are issued or will our new Government let loose more banks to lead the cattle to the slaughter house? And what if the new banks are let loose without any meaningful new rules being framed? As usual we will sit on the side lines and watch. Wont we:)