DNAIndia reports from Bangalore.
As techies default on EMIs, banks are reclaiming their homes
N Raghuraman. Bangalore
If you are a code jock or call centre employee, watch out. Your dream home is about to become a nightmare. Worried about your ability to repay, banks are in overdrive to repossess your property if you have not been paying your equated monthly instalments (EMIs) for more than three months.
Over the last few days, nationalised and private sector banks have issued a rash of repossession notices in newspapers to recover properties from borrowers who have been defaulting on EMIs. Industry insiders say that one out of every 10 homes bought with loans is in default in Bangalore city, most of it from the technology and BPO sectors. The houses being reposssessed are spread out across the city, from HAL Stage III to Kumara Swamy Layout and from Vignana Nagar to RT Nagar.
"The IT sector is one of the main contributing factors for the repossession drive that banks are undertaking in Bangalore. Several IT companies have laid off employees and the bonuses of several others have been cut, which has resulted in defaults in home loans," admits BR Bhat, general manager, Corporation Bank. The bank has a Rs 1,000 crore home loan portfolio in the city and the share of IT staffers is nearly half of that.
According to banking industry insiders, almost all banks in the city have registered a 20% increase in loan defaults, and thousands of properties are being recovered under a stringent law called Sarfaesi – or the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002.
The Act empowers banks and housing finance companies to recover their dues in case of defaults within a specified timeframe. Earlier, banks had to file civil suits against defaulters, which could take more than 20 years to settle cases.
In the first half of this month alone, the recovery process has been initiated on various flats and independent houses worth Rs 80.23 crore. The number will surely bloat as this is only the tip of the iceberg, and banks are worried about the impact of these defaults on their bottomlines.
"It would be foolish to live in denial that there will be no impact of the (global) slowdown on our books. This will be reflected in our books in the coming quarters. In Bangalore, there might be more home loan defaults under the current circumstances. But things are not out of control," says Syndicate Bank chairman and MD George Joseph.
At least 15 nationalised and old private sector banks have initiated recovery proceedings and they are in various stages of execution. The list includes Vijaya Bank, Andhra Bank, Syndicate Bank, SBI, State Bank of Mysore, the Bangalore City Cooperative Bank, Corporation Bank, Canara Bank, Federal Bank, Bank of India, Karnataka Bank, Karnataka State Financial Corporation, Citibank and Indian Bank.
If one goes by the printed notices, Canara Bank, Vijaya Bank and State Bank of Mysore seem to be worst affected with their non-performing assets (or bad loans) contributing 80% of the dues which are under process.
As techies default on EMIs, banks are reclaiming their homes
N Raghuraman. Bangalore
If you are a code jock or call centre employee, watch out. Your dream home is about to become a nightmare. Worried about your ability to repay, banks are in overdrive to repossess your property if you have not been paying your equated monthly instalments (EMIs) for more than three months.
Over the last few days, nationalised and private sector banks have issued a rash of repossession notices in newspapers to recover properties from borrowers who have been defaulting on EMIs. Industry insiders say that one out of every 10 homes bought with loans is in default in Bangalore city, most of it from the technology and BPO sectors. The houses being reposssessed are spread out across the city, from HAL Stage III to Kumara Swamy Layout and from Vignana Nagar to RT Nagar.
"The IT sector is one of the main contributing factors for the repossession drive that banks are undertaking in Bangalore. Several IT companies have laid off employees and the bonuses of several others have been cut, which has resulted in defaults in home loans," admits BR Bhat, general manager, Corporation Bank. The bank has a Rs 1,000 crore home loan portfolio in the city and the share of IT staffers is nearly half of that.
According to banking industry insiders, almost all banks in the city have registered a 20% increase in loan defaults, and thousands of properties are being recovered under a stringent law called Sarfaesi – or the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002.
The Act empowers banks and housing finance companies to recover their dues in case of defaults within a specified timeframe. Earlier, banks had to file civil suits against defaulters, which could take more than 20 years to settle cases.
In the first half of this month alone, the recovery process has been initiated on various flats and independent houses worth Rs 80.23 crore. The number will surely bloat as this is only the tip of the iceberg, and banks are worried about the impact of these defaults on their bottomlines.
"It would be foolish to live in denial that there will be no impact of the (global) slowdown on our books. This will be reflected in our books in the coming quarters. In Bangalore, there might be more home loan defaults under the current circumstances. But things are not out of control," says Syndicate Bank chairman and MD George Joseph.
At least 15 nationalised and old private sector banks have initiated recovery proceedings and they are in various stages of execution. The list includes Vijaya Bank, Andhra Bank, Syndicate Bank, SBI, State Bank of Mysore, the Bangalore City Cooperative Bank, Corporation Bank, Canara Bank, Federal Bank, Bank of India, Karnataka Bank, Karnataka State Financial Corporation, Citibank and Indian Bank.
If one goes by the printed notices, Canara Bank, Vijaya Bank and State Bank of Mysore seem to be worst affected with their non-performing assets (or bad loans) contributing 80% of the dues which are under process.
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