HDFC CORPORATION OFFICIALS MISUSE SARFAESI ACT

The global economic meltdown began when housing financiers in the USA started indiscriminately cracking down on borrowers. This was later on named the Housing Tsunami. If we are not be similarly placed in the near future when no one might be looking, our ways in these matters need changes of motives and procedures.

I recently came across HDFC, the largest private housing financiers in India advertising that their Cochin office had taken over some properties for non-repayment. The majority of the cases had total outstanding balances of less than Rs. 1.75 lakhs, to read from the advertisements. Considering that even a Cent of housing property in Ernakulam district is worth more than Rs. 2 lakhs, this seemed to be over enthusiasm for some reason on the part of the lenders.

It was seen that these loans had all been taken around 2002-2003 when the interest rates were around 7 or 8%. Within a few months however, rates began to climb. Currently, this particular lender charges 12.5%. The extra interest on each defaulted EMI is 18% additionally. The pathetic situation of the non-wilfully defaulting borrower can be imagined. The initial rosy interest rates offered are called Teasers; to tease the innocent public with!

In the current scenario, the borrower would have to again pay at least Rs. 5000/- extra per lakh for each year of the loan, to get his title deeds back in the end even if agreed instalments are regularly remitted. This is because interest has been raised to 1 ½ times arbitrarily after getting the borrower to sign for the loan at 7 to 8% interest. If it be a twenty year loan, he ends up paying Rs. 1 lakh additionally for each Rs. 1 lakh borrowed, over and above the originally agreed repayment. If three instalments are defaulted, the loan becomes an NPA and within 6 months of continued default, this lender moves in under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI], no questions asked. This draconian law was put in place to hide and shift from bank officials, accountability of deliberate bad loans. The take-over of property draws attention away from official misdemeanours in processing, sanction and conduct of the bad loans. The fixing of NPA at the end of three months is even anti-Indian when we admit our slow pace of national life.

The RBI has laid down that a defaulting borrower should be advised in advance of the lenders’ intention of deeming him a wilful defaulter; his objections to it should be called for and heard. This is not done by the Company or for that matter, by most banks. It might be that the default is due to temporary issues like illness or loss of job. What the non-wilful defaulter receives out of the blue at the end of six months of default is a Notice telling him that his property would be taken over if he does not remit the entire dues and costs within 60 days. Till recently, the borrower had to first remit 75% of the dues if his petition against re-possessing was to be even admitted by Courts. Even now, the waiving or fixing of such remittance is left to the discretion of the Judge. While the Act requires the Notice to be issued only by an authorised officer of the financier, HDFC gets a top lawyer to issue it. The charges of Rs. 5000/- for that small notice is immediately loaded into the loan dues.

At the end of the 60 day period, the Company would make a request to the Collector. The lower officials would then be properly met by the Recovery agents of the Company and assistance of the Revenue and Police officials are immediately made available for possession of the house by the lender.

This procedure at the Collectorate is merely anti-people. Housing field or elsewhere, it is known that private banks and financiers falsify their accounts. Anyone that has been taken to Court by the new generation banks about a Personal Loan knows it. Huge hidden and coercive charges are loaded into the final dues position. The amount demanded in recovery is invariably very much more than is legally eligible. Nevertheless, at the Collectorate, no questions are asked and the Police and Revenue staff is enthusiastically released to the Recovery agents.

Ideally, the Collector should make independent enquiries of each case, call up the defaulter to hear him and only then move to the final catastrophe. It is from dearly held dwellings that the eviction based only on the statements of the often fraudulent lenders is to be done! And no Keralite would ever default on a housing or gold ornament loan unless it is his suicidal only option. No middle class borrower can fight the financier in Court because of the financial might of latter to get the costliest lawyers.

I enquired about why the final dues in the aforementioned cases were less than Rs. 1.75 lakhs and yet such drastic measures were employed. I was astounded to hear that the actual dues are even less! And this is how it happens.

RBI has instructed that if the dues are Rs. 1 lakh or less, coercive measures of recovery should not be used. Such dues are to be only settled on arbitration. To overcome this difficulty, the Company has ways of bringing the balance to above one lakh. The intended possession of the property is advertised in all the editions of the biggest newspaper of the Company’s choice. Advertising costs come to around Rs. 50000/-. Each demand call by the Recovery officials is charged to the borrower at a minimum of Rs. 750/- per visit. Expenses of recovery procedure at the government official levels are at least Rs. 25000/- and may go up to any amount. Thus even if the loan dues is only Rs. 20000/-, the amount claimed for recovery is easily boosted to above Rs.1 lakh. There is no mechanism anywhere to check costs of such recovery procedure. Neither government nor the law comes to the poor innocent defaulter’s aid. In the cases we talked about earlier, the actual dues were only around Rs. 75000/- to Rs. 90000/-.

It might be that the Company’s Recovery officers who engage the Recovery agents etc have vested interests. I was told that the same group of buyers purchase all the property put to auction by the Company, in different names. One might suspect some collusion here. The Recovery officers of Kochi told me that their NPA rate is 0.7% as against 0.8% of the Company’s national average and therefore, they do not care about customers’ difficulties. Their motive is to reduce their NPA rate further. They cannot be bothered about any social commitment. They advise the borrower to sell the property and offer to find buyers. Imagine a borrower in temporary difficulties being thus coerced into selling his 10 cents with house so that a Rs. 10000/- or Rs. 20000/- of overdues can be normalised in the Company’s books. They gloat over it that in the case of a KSEB employee of Angamaly with an overdues of Rs. 24000/-, intervention by even Sri. Oommen Chandy could not prevent them from seizing the 10 cents and house near Nedumbassery airport!

At least three fourths of all the houses built in Kerala during the past ten years, especially by the middle classes and NRIs, are mortgaged to companies like this and new generation banks. It is obvious that a predatory style is adopted by the financiers. If we do not move in to put in checks now itself, the consequences might be catastrophic.

The lender has rights to be repaid. At least in the housing sector however, a humane approach to recovery is not a sin. Lenders should be made to hear the borrowers as stipulated by RBI, before treating them as wilful defaulters. As said in the RBI’s handbook on NPAs, one is a wilful defaulter only if he has funds and yet, does not remit. The SARFAESI is not applicable to agriculture debts, dues below Rs One lakh; and to non-wilful defaulters as per the Act. This is so even for corporations with dues of Rs. 50 crores or above. An NRI or employee that loses a job or falls ill does not come under this category. The bankers and financiers do not however, take this into account. The procedure for treating such borrowers has also been stipulated by RBI. The lender should only re-structure such loans allowing the borrower more time or lesser instalment amounts. This is at least thought of by our lenders only in the case of very big borrowers to help them. And in the case of PSBs, a final assistance is always done to big borrowers by settling for a much lower amount than the dues. Often, the money thus given runs to crores. But not so, to middle class house owners with two or three lakh debts, trying to cling on to their only tangible asset!

Collectorates should hear the defaulter before acquiescing to the arbitrary requests of lenders to help them take over houses and evict the owners. They should if necessary, even intervene between the two parties so that emotional and other disasters do not occur. Any popular administration should do so.

Unfortunately, the media that has to consider advertisement revenues from big lenders often fail to highlight this situation. A covert meltdown therefore, awaits Kerala’s middle classes to whom a house of their own is the ultimate dream, only due to administrative and media apathy.

Who Is Nouriel Roubini?
by Alice C. Chen

Is economist Nouriel Roubini a prophet or a perpetual pessimist who happened to get it right? In 2004, the New York University professor started to see disturbing trends he thought would lead to a crippling U.S. recession and a global slowdown. While other economists echoed his view at times, Roubini was the most consistent and bearish, even when his predictions failed to happen. So, most mainstream economists dismissed him simply as a perma-bear.
Five years after his initial warnings, he's one of the most sought-after advisers in the world, strategizing with entities like Congress and international finance ministries.

His Predictions
While other economists thought the real estate bubble would burst, they didn't realize the extent of the devastation because housing is only about 6 percent of America's GDP. Roubini, however, was one of the few who saw the link between housing and consumer spending, which makes up more than 70 percent of the U.S. GDP and about 25 percent of the world's purchases of goods and services. As real estate prices soared, consumers used home equity loans to finance more expenditures.“(T)he only way you can liquefy your wealth is by using your home as your ATM machine, and that is exactly what has happened in the last few years,” Roubini told an audience at the International Monetary Foundation in 2006.
Roubini also saw the makings of a massive, global trade imbalance. The U.S. was borrowing from China to purchase Chinese goods. China was buying commodities from Latin America and the Middle East to produce those goods. If China experienced any internal disruptions and it stopped financing the U.S., the dollar would devalue, consumer spending would drop, and a global economic slowdown would result.
Bottom line: America was borrowing from other countries to fund consumption and housing rather than productive investments that create exportable goods and services. Roubini concluded the trend was unsustainable. “The bursting of the housing bubble is going to lead to broader systemic banking problems,” he told the IMF audience. “The rest of the world is not going to be able to decouple from the U.S. even if it is not going to experience an outright recession like the United States.”

His Method
While many economists rely mostly on rigorous econometric formulas, Roubini assumes that quantitative methods alone can't explain unprecedented moves in the global economy. So, he adds a heavy dose of intuition, historical analogies, and circumstantial observation to his work. He derives most of his forecasts from simple data like supply-and-demand models and ratios of home price versus rent and home price versus income. Other economists use computers to crunch data, but Roubini uses his brain, says Christian Menegatti, lead analyst at Roubini's firmRGE Monitor.
His nontechnical framework has been likened to those used by noted economists Joseph Stiglitz and Paul Krugman. And Roubini told the New York Times that Alan Greenspan and John Maynard Keynes have influenced his methodology. His approach to economics isn't radical, but his style can be considered flamboyant, says Brad Setser, who co-wrote a book with Roubini and is now a fellow at the Council on Foreign Relations Center for Geoeconomics. A recent Roubini blog post illustrates the point: “(T)hese Bush hypocrites who spewed for years the glory of unfettered wild west laissez faire jungle capitalism allowed the biggest debt bubble ever to fester without any control (and) have caused the biggest financial crisis since the Great Depression.”

The Debate
Anirvan Banerji, director of research at the Economic Cycle Research Institute, praises Roubini for correctly capturing the nature of the crisis but points out that his timing was repeatedly off. What if the Fed had adjusted interest rates or businesses stopped hiring based on impending recessions that didn't occur?
But, Darrell Duffee, a finance professor at Stanford's Graduate School of Business, says timing is not so important. "His skeptical commentary has been very, very useful," says Duffee, who added that Roubini's warnings were meant to straighten out the financial sector. Indeed, in November 2004, Roubini warned on his blog, “Serious financial distress from unsustainable fiscal and current account deficits cannot be ruled out.”
Banerji also criticizes Roubini for changing his justifications for the recession as he kept missing the timing. First it was the trade deficit, then oil price shocks, then the housing downturn, and finally the credit crisis, Banerji says. "There's something lacking in terms of understanding what triggered the recession," he adds.
Supporters argue that Roubini emphasized different vulnerabilities but his overarching argument remained the same. "The U.S. wasn't borrowing from the world to finance productive investment (and) that process would end badly," says Setser.
His Solution
Roubini expects things to get worse before they get better and predicts the recession will last at least until the end of 2009. In general, he advocates for the government to stabilize the economy through monetary and fiscal policy. Here are his recommendations to stop the credit crisis:
• Temporarily freeze all foreclosures.
• Create massive fiscal stimulus packages of at least $400 billion for public works, infrastructure spending, unemployment benefits, and tax rebates to lower-income households. Provide grants to state and local governments in dire need of funding.
• Coordinate interest-rate cuts globally.
• Temporarily insure all bank deposits. Allow insolvent banks to shut down and partially nationalize solvent but distressed banks.
• Open credit lines to solvent financial institutions and companies.
• Inject money into banks by buying equity.
• Coordinate a global effort to gradually adjust trade imbalances.
Policy makers around the world have heeded most of Roubini's suggestions. Hopefully the one who saw it all coming sees the correct solution as well.



• Name: Nouriel Roubini
• Also known as: “Dr. Doom”
• Age: 50
• Profession: NYU economics professor, co-founder of the economic-analysis firm RGE Monitor.
• Why he matters: Since 2004, Roubini has been the most pessimistic — and most accurate — predictor of the economic crisis. People ignored him then. They don't anymore.

12 STEPS TO FINANCIAL MELTDOWN
Nouriel Roubini
February 2008

First, this is the worst housing recession in US history and there is no sign it will bottom out any time soon.

Second, losses for the financial system from the sub prime disaster are now estimated to be as high as $250 to $300 billion

Third, the recession will lead - as it is already doing - to a sharp increase in defaults on other forms of unsecured consumer debt: credit cards, auto loans, student loans.

Fourth, while there is serious uncertainty about the losses that monolines will undertake on their insurance of RMBS, CDO and other toxic ABS products, it is now clear that such losses are much higher than the $10-15 billion rescue package that regulators are trying to patch up.

Fifth, the commercial real estate loan market will soon enter into a meltdown similar to the sub prime one.

Sixth, it is possible that some large regional or even national bank that is very exposed to mortgages, residential and commercial, will go bankrupt.

Seventh, the banks losses on their portfolio of leveraged loans are already large and growing. The ability of financial institutions to syndicate and securitize their leveraged loans - a good chunk of which were issued to finance very risky and reckless LBOs - is now at serious risk.

Eighth, once a severe recession is underway a massive wave of corporate defaults will take place.

Ninth, the "shadow banking system" or more precisely the "shadow financial system" (as it is composed by non-bank financial institutions) will soon get into serious trouble. This shadow financial system is composed of financial institutions that - like banks - borrow short and in liquid forms and lend or invest long in more illiquid assets.

Tenth, stock markets in the US and abroad will start pricing a severe US recession.

Eleventh, the worsening credit crunch will lead to a dry-up of liquidity in a variety of financial markets, including otherwise very liquid derivatives markets.

Twelfth, a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction.

A Comment by caddit
01/08/09

Seven points not a solution
Roubini might have understood the the logistical and financial variables which lead to recession. But his apparent "seven points" don't make sense.

How can a government already in extreme debt come up with a $400 billion stimulus package? According to http://www.washingtonpost.com/wp-dyn/content/article/2008/11/18/AR2008111803558.html at least part of it must be borrowed - much of it from China.

At the same time, the American consumers still insists they have all the best 'because we're American's after all'.

Sounds more like a spanking is in order for a very naughty and irresponsible child. The only shame is that the rest of the world suffers to a smaller degree while their main export market gets what it deserves.

Short Note on 'cash'te-ism

Originally, modern humanity had two castes – man and woman. The difference between them having become blurred now, we might redefine elementary castes as the ruled and the ruling. Segregation within the community on the lines of power has always been there in all societies; still is, and would be, call it by any name. Genetic technology would make birth-based caste further irrelevant.

Merit would always out. That is why we know of the great Brahmins and Kshatriyas of the Puranic times only through the stories created by meritorious lower caste Valmikis and Vyasas.

But for the caste columns, that the administration wants to be filled up, caste-ism is very insignificant to a major section of Indians. Taking away those columns in the case of those who do not want any affirmative benefits, would be a good initial step to remove current caste-ism quicker.

The Two day Bank Strike in India

Beginning with their 4th January 2002 all India strike to protest the transfer of 22 employees of the Standard Chartered Bank to outside Kolkata (the 22 affected employees refused to participate in the Strike), government bank unions in India have been abusing their consolidated might in a perverse manner. In an age of global competition, when they should be trying to take government banks to better strength in the competition with new private banks, they have been frequently striking work in a whimsical manner as if they have some thing against PSBs and something for the new generation banks that get more and more big customers every time the PSBs do not function. This week’s two-day strike is an example.

Among others, the strike was also against merger of Subsidiary banks with SBI. The merger would give Pension as a third Retirement benefit to Subsidiary bank employees. Consolidation of banks would help take PSBs, especially SBI that has lost the race to ICICI, ahead of new generation global banks. In a market economy, a few bank employees cannot stop FDI in any sector by striking. With new technology, Office-based banking has disappeared and expansion of branch network is no longer relevant. As long as RBI stipulates lending priorities, priority sector lending would not be affected. The grounds cited for the strike thus fail to convince.

The only outcome of the strike four days ahead of half-yearly closing is paralysis of transactions for two whole days in a fast moving world. Government did not act because they are also for the new generation banks. As with every PSB strike, a large number of big customers have switched to new generation banks this time also. One wonders who the dubious strike was actually for.

KERALA - BANDHS AND GUNAS

After the Aryans intellectually overcame the Malabar of those times, they imposed Varna Ashrama in the land. They studied the people and socially categorized them into layers that would ultimately benefit the Aryan scheme of things. The Aryans naturally took the highest level of Brahmins for themselves. All those that aligned with them like the Ambalavasis or temple workers, were made half or quarter Brahmins. The Nairs were the warriors and kings and could not be antagonised. The money and lands were with them. Therefore, the next rung was practically theirs. Nevertheless, only the Kings among them were made temporary Kshatriyas through elaborate rituals.
The Varna categories had to be justified through genetic dispositions or gunas of the people. In Samkhya philosophy a guna is one of three "tendencies": tamas, sattva, and rajas. These categories were a common means of categorizing behaviour and natural phenomena in Hindu philosophy, and in Ayurvedic medicine, as a system to assess conditions.
The Brahmins had to have the Sattva element, translated to mean balance, order, or purity; in their genes. The Kshatriyas had to have Rajas or activity; the Vaishyas were of Rajas or Tamas, and all the rest possessed only the Tamas quality.
The Aryans in their wisdom attributed the Tamas disposition to the majority of Malabaris. In fact, except for the Aryan Brahmins or Namboodiris, all others in Kerala are Shudras and Chandalas. While this might all be traced to political considerations, the ‘scientific’ basis of the classification cannot be merely wished away in view of the general personality make-up of Mallus as seen in their current bandh/hartal/strike culture.

Tamas (originally "darkness", "obscurity") has been translated to mean "too inactive", negative, lethargic, dull, or slow. A tamas quality can imply that a person has a self-destructive or entropic state of mind. That person is constantly pursuing destructive activities. Indologist Georg Feuerstein translates tamas as "inertia"
Tamas, or tamo-guna, is the lowest of the three gunas. It is a life force or energy that is characterised by one or more of the states of: (1) darkness, (2) death, (3) destruction, (4) ignorance, (5) sloth and (6) resentment. Tamas is static, unlike rajas or sattva. This most negative guna rejects Karmic Law and the central principle of dharma that one's Karma must be acted out and not ignored.
Now to Kerala’s all-paralyzing Bandh culture. Kerala celebrated its 78th all-state Bandh of the year on 20th August 2008 as part of the national strike by Left unions. There had also been several ward/pachayat/village/constituency/district bandhs in the State in between. Being too usual, these are not enumerated anywhere.
Keralites are said to actually celebrate Bandhs. The cable TV and the Internet have made the salaried middle classes look forward to days of such enforced leisure. Kerala Civil servants do not have a dies-non on Bandhs. The government pays them salary for striking work and joining Bandhs. The manual labourers of Kerala are higher paid than their counterparts anywhere else in the world and they too do not mind a day without work. The characteristics of the tamo-guna are thus strongly exhibited in the work culture and lifestyle of Mallus at home. They themselves thus prove the Aryans right in classifying them all as Shudras and Chandalas.
What lets such forces of darkness, death, destruction, ignorance, sloth and resentment colonise the fertile brains of Mallus, only when they are within Kerala? It could all merely be the effects of the extreme humidity of the climate and the radiation from the coastal mineral sand in God’s own country! The evil forces of Globalisation that are said to be attempting exploitation of this labour paradise ought to research this.

LEFT BANDH ON JULY 20, 2008

Victim: The strike on Wednesday stopped Rodia from rushing to Kottayam from the capital city after her four-year-old son died. Here, she walks out of the Kottayam railway station with her elder son.
KOTTAYAM: In a heart-rending scene at the Thiruvananthapuram Central station on Wednesday, a young woman (Rodia Santhosh) was seen weeping even as political activists picketed the train which was to take her home for a last glimpse of her son.
Rodia Santhosh had come to the capital city to consult doctors at the Regional Cancer Centre in the hope of prolonging her four-year-old son, Richu’s life. Richu (Ronal Santhosh), afflicted with blood cancer, was fighting for life at a private hospital in Ernakulam. For the mother, it was the last ray of hope.
But, the world collapsed before her when news came in that the boy had given up his fight against the silent killer. Ms. Rodia received the shattering news on Wednesday morning. She rushed to the station to take the Bombay Jayanti-Janata Express, scheduled to leave at 7.10 a.m., to take her to Kottayam. However, what greeted her was something different — political activists were picketing trains, leading to long delay. She, along with her brother, had no option but to wait in the waiting room, weeping in silence.
Finally the train resumed journey after a delay of one hour and the authorities interfered to make her travel as fast as possible, as television channels aired the story.
She arrived at the Kottayam railway station by 2.20 p.m. Her elder son Jithu (Sonal Santhosh) and other relatives were waiting here to take her to her house at Kattachira, near Pala.
Police help out
A consoling factor was that police personnel took the initiative to make her travel from Kottayam to Kattachira as easy as possible. The mother and her relatives were taken home in police vehicles.
Ronal was the son of Santhosh Mathew of Ponkathil House, Kattachira, a businessman settled in Ernakulam. His wife Rodia is a beautician. The funeral will be held at St. Xavier’s Church cemetery, Kattachira on Thursday morning. Every hartal begets its own stories of inhuman sufferings caused by the insensitivity of this strange political weapon. On Wednesday, it was Ronal’s mother’s turn.
------------------------------------------------------------------The passing away of the infant was long anticipated; the Bandh had nothing to do with it. The mother's not being able to rush back was unfortunate; but in Kerala, such delay could have happened on any other day also, due to any number of silly causes including a text book-agitation morcha or train picketing by the UDF. That the CM and the DGP rose to the occasion is unfortunately not being highlighted elsewhere. Why did the other passengers in the Waiting Room omit to do anything at all? Lucky that the affected happened to be Christians from Manorama territory!

What can we expect from the LDF in Bandh matters when the Opposition is so ridiculous as to call for Bandhs even against Chikun guniya?

In the early 1970s, the CPM burned a transport bus in Malabar during a Bandh. A passenger’s burned corpse remained in the bus, sitting on a scorched seat, with its arm raised and bent as if in a question mark to the society. Manorama had made a lot about it in those days. Unfortunately, none of their new boys know about such bloodier early times of Kerala Bandhs.

Hope now lies on goondas and bullies like the NDF and RSS moving against Bandh-ers on behalf of the MNCs in the near future. Ushnam ushnena shanthi! The Church can also help with a few Idaya Lekhanams! Bandhs by the Church and the RSS/NDF would also be suitably defeated by the others then.

ABOUT THE LEFT'S WITHDRAWAL OF SUPPORT TO THE UPA

We are masters of self-deception and naïve hypocrisy. Unfortunately, our Prime Minister is not as good as we all are. That is why he was open and honest about the Nuclear deal unlike the rest of our so-called leaders. Well spoken, Sardarji!
The fact remains that the CPM’s alliance with the Congress was merely an extension of the multinational business and commercial relationship of Com. Surjeet Singh’s family with Sonia Gandhi’s family in Italy. One fails to see why the media is still silent about it. Nevertheless, stories of the various business deals of the UPA government thereby influenced by the CPM during the past four years are sure to come out in the days to come. It is likely that the Left would be irrelevant in Indian politics for a few years now, except for their being mentioned constantly in connection with such deals.
It is also to come out that the Left’s opposition to the Nuclear deal was only because it was ignored in the comforts-arrangements with the nuclear fuel supplier companies from the NSG countries.