Real estate debt levels #simply_scary

Real estate euphoria is slowly dying and the developers are facing some sort of difficulty- Most of us know this from the reports that we read.

Today, I happened to have a conversation with a person with a RE insider during my train journey and it was nothing less than scary!

• One of the RE company is having debt up to Rs 1000 crores while the paid up capital as per books is below 20 crores( the actual capital got in by the promoter is far far less --- :-( , that should be another story)
• The company has been using one bank debt to pay another cyclically and so on and they are managing this through their "contacts".
• One famous private sector bank which is the darling of the stock market is keen on re-financing one of their loans on the condition that they will be the preferred partner for retail loans if and when they sell the flats. The logic being that retail loans seldom go bad!
• Also got to know that the company had previously "pleased" a lot of people to get the loans.
• Even if the company manages to sell all their existing stock and WIP at current prices, they will be able to manage only 50% repayment of the debt. 

Not sure what if the RE bubble burst, a few banks may actually go bust. ( But for all retail investors,Fixed deposit seems the safest investment ;-) )

NPAs from real estate and infrastructure sector can play out more differently than what we can predict.

Fingers crossed on what will happen and how stock market would play out eventually.

At least, I feel very very scared!!

#Bank charges for ATM usage?

Warning:- Please do not read this article on a "serious" note.

I found this news item this morning on proposed charges for ATM usage by banks.

Banks want to recover the cost of "additional" security and hence want to charge customers for ATM usage. if this trend is encouraged, banks will start fleecing the customers with following charges!! :-))

1) Charges for opening an account.

2) Charges for safeguarding cash in account as a % of amount in the bank account or a minimum amount if balance falls below 100000

3)Charges for using the bank premises for any transaction

4) Charges for calculating interest every half-year

5) Charges for every "login" through Internet banking as it causes a "Strain" on the IT infrastructure of banks

6) Charges for using "Debit " card as indirect cost incurred on maintaining POS terminals

7) Charges for NPAs when the bank is not able to recover from a BIG borrower

8)Charges for issuing passbook or account statements

9)Charges for talking to "telephone" banking
10) Charges for using various application forms/ pay in slips, etc as cost is involved in printing them.
11)A/ C  charges for visting an A/C branch.
12) Service charges for maintaining the ledger balances of customers!
13) Parking charges outside bank, ATM
and the list can go on.

Bottom line is, Banks should know how to manage their cost and maintain margins, If they start charging customers for their "inefficiencies"- then they will eventually "suffer"as people will start storing money in "lockers".

Punishing non-performers.

When you deposit your money with a bank, you presume it would be safely returned to you. How many times do you check whether your money is put to good use by the bank?.

You may ask " why is it important to do that?'. It is really important because, the bank may go bankrupt if it is doing some irresponsible lending. This can lead to loss of your deposit ( I am not in for arguments like government will back it up, deposit insurance,etc,etc as it is not good for the economy in the long run)

So, it is very important to punish the non-performing banks by withdrawing your deposits from them or at least making a conscious decision of making no further deposit with a non-performer.

Look at the NPAs ( Non Performing Assets- bad loans) of the banks, if they are continuously on the raise ( when compared to industry standards and other banks), you should start treating your bank as a non-performer.

If you do not do this, it helps the people of the following kind

"Those who take loan with political pressure and don't pay back, helps the real estate guys who can keep the prices high funded by bank loans and never bother to pay them soon, helps the industrialist who run a show business and do not care to pay even their employees."

So, you are helping these guys when you don't punish non-performers. Next time, when you see an article about you bank's NPA - " ACT ON IT". Punish the non-performers.