NE India Corner

[zootinali]

Would be a bit** extracting it from there. Karbi locals are not well known for their hospitality towards outsiders.

it depends on how many of them get jobs in the company.Usually they are welcoming if local youth get preference for jobs. Like everyone they dislike it when even for menial jobs , people are "imported" from outside. They tend to cooperate if some of them have any position in the company.

 

[Tshering22]

Would be a bit** extracting it from there. Karbi locals are not well known for their hospitality towards outsiders.

I don't see why we need to extract it right now considering that the costs incurred are higher than the revenues that it may generate looking at the global trend.

 

[The Huskar]

I don't see why we need to extract it right now considering that the costs incurred are higher than the revenues that it may generate looking at the global trend.

Just considering the scenarios. Oil prices are not gonna remain low forever.

 

[Tshering22]

Just considering the scenarios. Oil prices are not gonna remain low forever.

Long term yes you're right.

But under most scenarios under current government of India regulations, the fare of oil is 25-30% higher than the rest of the world, largely dependent on what grade of fuel one intends to purchase. It doesn't make sense to extract oil at least for a couple of years.

Take the average trend of prominent oil prices across large economies and compare it to India for the last 10 years. You will find that the price we pay is much higher than what Americans, Chinese, British, Indonesians etc pay.

This is because of a stream of taxes and levies the government charges ON TOP OF the oil profits that it earns. It means the GOI is doing the people a favour for extracting it, profiting from it and then taxing us further for a thing that they are already earning a tax from us on.

Also India exports oil (ironically), after refining them to the desired fuel grade like aviation turbine fuel and not everything that we have to extract is sold within the country, because exports earn $$ rather than Rupees which we will pay in.

It won't benefit India either ways right now.

 

[Brahmaputra Mail]

Long term yes you're right.

But under most scenarios under current government of India regulations, the fare of oil is 25-30% higher than the rest of the world, largely dependent on what grade of fuel one intends to purchase. It doesn't make sense to extract oil at least for a couple of years.

Take the average trend of prominent oil prices across large economies and compare it to India for the last 10 years. You will find that the price we pay is much higher than what Americans, Chinese, British, Indonesians etc pay.

This is because of a stream of taxes and levies the government charges ON TOP OF the oil profits that it earns. It means the GOI is doing the people a favour for extracting it, profiting from it and then taxing us further for a thing that they are already earning a tax from us on.

Also India exports oil (ironically), after refining them to the desired fuel grade like aviation turbine fuel and not everything that we have to extract is sold within the country, because exports earn $$ rather than Rupees which we will pay in.

It won't benefit India either ways right now.

Guess what ? We also have good amount of shale oil.

http://pubs.usgs.gov/fs/2013/3113/pdf/fs2013-3113.pdf

http://petroleum.nic.in/docs/shalegas.pdf

Although the process of Hydraulic Fracking makes it difficult to recover it as it requires huge amount of water and that this water becomes contaminated post the horizontal drilling and therefore needs to be purified. Currently this process is expensive. I hear students of IIT are doing a research on non-water based Hydraulic Fracking. This will be easier than the current process.

Check the limitations with this process of hydraulic fracking:
Dangers of Fracking

ONGC has been given the right for shale gas exploration

Exploration of Shale Gas

Unfortunately different agencies have given different estimates for the shale gas reserves in India, particularly Assam.

 

[Brahmaputra Mail]

@PARIKRAMA A shopkeeper told me how businesses are running in Assam. A group of people buys land patta at Rs 1 lakh somewhere deep inside a village. While seeking a mortgage loan of amount say Rs 80 lakhs they mortgage this land citing its value at Rs 5 lakhs, much higher than the original value of Rs 1 lakhs. The bank people are convinced and therefore the loan of Rs 80 lakhs is granted for 5 years. So when the borrower party defaults without repaying a single fraction of amount of Rs 80 lakh the bank seize the land. But look at the margin here ! Rs 80 lakh borrowed, not a single penny of it returned so he loses his Rs 1 lakh of land patta. So it doesn't matter if he loses 1 lakh of land because he didn't have to repay the Rs 80 lakh he got as loan.

 

[zootinali]

Guess what ? We also have good amount of shale oil.

Unfortunately different agencies have given different estimates for the shale gas reserves in India, particularly Assam.

What is the most conservative figure ? Please answer in absolute layman term.

 

[PARIKRAMA]

@PARIKRAMA A shopkeeper told me how businesses are running in Assam. A group of people buys land patta at Rs 1 lakh somewhere deep inside a village. While seeking a mortgage loan of amount say Rs 80 lakhs they mortgage this land citing its value at Rs 5 lakhs, much higher than the original value of Rs 1 lakhs. The bank people are convinced and therefore the loan of Rs 80 lakhs is granted for 5 years. So when the borrower party defaults without repaying a single fraction of amount of Rs 80 lakh the bank seize the land. But look at the margin here ! Rs 80 lakh borrowed, not a single penny of it returned so he loses his Rs 1 lakh of land patta. So it doesn't matter if he loses 1 lakh of land because he didn't have to repay the Rs 80 lakh he got as loan.

Who in the world has credit underwriting people like that... Its not like that my friend
In an underwriting scenario for any mortgage backed loan or a collateral based loan, there are two major heads and 2 ratios which are important. Assuming its a loan for retail pupose not industrial where industrial cashflows also support repayments of loan dues.

The major first heads is classification of the collateral into agricultural or non agricultural. Non agricultural is further sub classed into residential, commercial and industrial property.
Agricultural land cannot be mortgaged, their papers at best can be kept as collateral in a vault but no legal right can be vested by a bank. This is the reason that such agricultural land loan backed loan will be at best given at 50% LTV (Loan to Value) or a limit of say Rs 10 lacs (varying from bank to bank)

Judging from the fact that if the property given is in village and quantum being Rs 80 lacs, its a public sector bank which can try this proposal but not private sector banks as their credit committee wont ever agree for residential, commercial and industrial property purely based out of village. In fact it can be mix of rural and semi-urban property if its a pvt sector bank.

Second thing is the underwriting basis which has lots of financial ratios. But collateral wise there are 2 ratios.

1. Loan Exposure to Collateral Value coverage.
If your loan is Rs 80 Lacs
If you say your collateral which is land is Rs 5 lacs, and is proved via a valuation report and a legal report stating no issues in title deeds and the property is clear for bank to mortgage, then considering the whole land with no margin of loss implies the collateral value at Rs 5 lacs.
Most banks dont do that, they normally consider not market value but rather conservatively a distressed sale value which is approximately 75% of Market value.

Thus you get 3 terms here
Book Value : Rs 1 lacs
Market Value: Rs 5 lacs
Distressed Sales Value: Rs 3.75 Lacs

So your Loan Exposure to Book Value Coverage : 80/1 = 80

This gives you the most conservative coverage.
The bigger organisations have properties which are bought for Rs 1 lacs or even less in books but today market value is in crores like SBI themselves having huge land bank properties.

This gives the second ratio

Loan Exposure to Market Value Coverage = 80/5 = 16
Loan Value to Distressed Value Coverage = 80/ 3.75 = 21.33

In all these cases the collateral coverage at best scenario of market value is 6.25% of the loan taken.

Thus this loan case will be outriught rejected by credit committee of the bank for mortgage loan as loan to collateral coverage is pathetically low.

2. The second part is additional security which can be
The Personal Guarantee: If the networth of the applicant is huge then the PG is taken to boost the loan exposure to security coverage ratio.

Example : Let PG of the applicant is say Rs 35 lacs declared as per networth sttatement , filed in ITRs and signed certified by a CA firm. Assume he has no other liabilities, then

Loan Amount: 80 lacs
Security land MV = 5 lacs
PG - 35Lacs
Security = 40 lacs
Loan to Security = 80/40 = 2

The PG basically is just a comfort factor not a recourse which in true terms means anything to a bank. They can attest the person as Wilful Defaulter as he stood as a guarantor for the loan by providing his personal networth as a compfort point for the bank to sanction loan against a meagre security of land he offered for the property He may also give a undated cheque for loan value as he is a guarantor which when sent for clearance and when bounced means he can be taken for a legal recourse.
Other options are FD, Gold, investments, shares etc ete where margins are deducted as per individual credit risk policies of the bank and as per RBI rule.

Most likely in this the second point is not applicable or else a police case would have been registered and the applicant picture would be published in Newspaper and declared WFD. this will lead to sealing of applicants all other bank accounts linked via PAN Card number,

This brings back to the original equation. Loan to Collateral value stands at 16. Which credit committee of the bank will approve it. IF Branch Manager gave this loan in his own discretionary power, then he is part of the fraud and will be fired + court case would be initiated by the bank for recovery.

In all such cases where you get land and a loan is asked normally you will get 50-80% of the value of the collateral.Anything over 100% would mean a product template deviation and will need higher authority to approve. In this case being 16 times many other comfort factors are needed which i dont believe in really would have been given as its case of fraud.

Thus, i believe the whole story is a hoax... You can fool a bank surely.. but when it comes to land as collateral, the legal and valuation report tends to be a strong point of providing comfort which leads to approval at different levels of credit committee or board risk committee for high leverage cases....

Its a bit far fetched story my friend....

 

[Brahmaputra Mail]

Who in the world has credit underwriting people like that... Its not like that my friend
In an underwriting scenario for any mortgage backed loan or a collateral based loan, there are two major heads and 2 ratios which are important. Assuming its a loan for retail pupose not industrial where industrial cashflows also support repayments of loan dues.

The major first heads is classification of the collateral into agricultural or non agricultural. Non agricultural is further sub classed into residential, commercial and industrial property.
Agricultural land cannot be mortgaged, their papers at best can be kept as collateral in a vault but no legal right can be vested by a bank. This is the reason that such agricultural land loan backed loan will be at best given at 50% LTV (Loan to Value) or a limit of say Rs 10 lacs (varying from bank to bank)

Judging from the fact that if the property given is in village and quantum being Rs 80 lacs, its a public sector bank which can try this proposal but not private sector banks as their credit committee wont ever agree for residential, commercial and industrial property purely based out of village. In fact it can be mix of rural and semi-urban property if its a pvt sector bank.

Second thing is the underwriting basis which has lots of financial ratios. But collateral wise there are 2 ratios.

1. Loan Exposure to Collateral Value coverage.
If your loan is Rs 80 Lacs
If you say your collateral which is land is Rs 5 lacs, and is proved via a valuation report and a legal report stating no issues in title deeds and the property is clear for bank to mortgage, then considering the whole land with no margin of loss implies the collateral value at Rs 5 lacs.
Most banks dont do that, they normally consider not market value but rather conservatively a distressed sale value which is approximately 75% of Market value.

Thus you get 3 terms here
Book Value : Rs 1 lacs
Market Value: Rs 5 lacs
Distressed Sales Value: Rs 3.75 Lacs

So your Loan Exposure to Book Value Coverage : 80/1 = 80

This gives you the most conservative coverage.
The bigger organisations have properties which are bought for Rs 1 lacs or even less in books but today market value is in crores like SBI themselves having huge land bank properties.

This gives the second ratio

Loan Exposure to Market Value Coverage = 80/5 = 16
Loan Value to Distressed Value Coverage = 80/ 3.75 = 21.33

In all these cases the collateral coverage at best scenario of market value is 6.25% of the loan taken.

Thus this loan case will be outriught rejected by credit committee of the bank for mortgage loan as loan to collateral coverage is pathetically low.

2. The second part is additional security which can be
The Personal Guarantee: If the networth of the applicant is huge then the PG is taken to boost the loan exposure to security coverage ratio.

Example : Let PG of the applicant is say Rs 35 lacs declared as per networth sttatement , filed in ITRs and signed certified by a CA firm. Assume he has no other liabilities, then

Loan Amount: 80 lacs
Security land MV = 5 lacs
PG - 35Lacs
Security = 40 lacs
Loan to Security = 80/40 = 2

The PG basically is just a comfort factor not a recourse which in true terms means anything to a bank. They can attest the person as Wilful Defaulter as he stood as a guarantor for the loan by providing his personal networth as a compfort point for the bank to sanction loan against a meagre security of land he offered for the property He may also give a undated cheque for loan value as he is a guarantor which when sent for clearance and when bounced means he can be taken for a legal recourse.
Other options are FD, Gold, investments, shares etc ete where margins are deducted as per individual credit risk policies of the bank and as per RBI rule.

Most likely in this the second point is not applicable or else a police case would have been registered and the applicant picture would be published in Newspaper and declared WFD. this will lead to sealing of applicants all other bank accounts linked via PAN Card number,

This brings back to the original equation. Loan to Collateral value stands at 16. Which credit committee of the bank will approve it. IF Branch Manager gave this loan in his own discretionary power, then he is part of the fraud and will be fired + court case would be initiated by the bank for recovery.

In all such cases where you get land and a loan is asked normally you will get 50-80% of the value of the collateral.Anything over 100% would mean a product template deviation and will need higher authority to approve. In this case being 16 times many other comfort factors are needed which i dont believe in really would have been given as its case of fraud.

Thus, i believe the whole story is a hoax... You can fool a bank surely.. but when it comes to land as collateral, the legal and valuation report tends to be a strong point of providing comfort which leads to approval at different levels of credit committee or board risk committee for high leverage cases....

Its a bit far fetched story my friend....

Lol I lost you there. Anyways there must be some loopholes which these businessmen have capitalized over. Let's not forget the nationalised banks have the highest NPAs for a reason.

What is the most conservative figure ? Please answer in absolute layman term.

There is no exact value. You can go through the links I gave. The last one mentions the estimates, but it's a combined one and not exact specific for Assam.

 

[PARIKRAMA]

Lol I lost you there. Anyways there must be some loopholes which these businessmen have capitalized over. Let's not forget the nationalised banks have the highest NPAs for a reason.

Possible..
Modus operandi is normally forged PAN cards of the applicant giving you a clean bank record... forged Networth statements.. The legal and valuation reports are normally done by bank authorised persons.. you can of course inflate the collateral value by 20% by paying few thousands/lacs extra.....
But when such cases of fraud happens, you need an insider who knows what his bank sees while approving such loans...
thus if such a fraud happened in reality, fingers should be pointed on application appovers and Branch managers..

And yes, NPA cases are pretty high in PSB owing to giving loan without due veracity.. for 1%-3% commission on loans, Branch managers with approving powers gives loans on all cases just like that..

And finally the result is a systemic mess which cripples the country

 

[Brahmaputra Mail]

Possible..
Modus operandi is normally forged PAN cards of the applicant giving you a clean bank record... forged Networth statements.. The legal and valuation reports are normally done by bank authorised persons.. you can of course inflate the collateral value by 20% by paying few thousands/lacs extra.....
But when such cases of fraud happens, you need an insider who knows what his bank sees while approving such loans...
thus if such a fraud happened in reality, fingers should be pointed on application appovers and Branch managers..

And yes, NPA cases are pretty high in PSB owing to giving loan without due veracity.. for 1%-3% commission on loans, Branch managers with approving powers gives loans on all cases just like that..

And finally the result is a systemic mess which cripples the country

The shopkeeper did tell me about the risks of defaulting and how it gets registered in the PAN number.

Anyways I hear student loans are one of the main contributors to NPAs of these nationalised banks. Is that true ?

 

[PARIKRAMA]

The shopkeeper did tell me about the risks of defaulting and how it gets registered in the PAN number.

Anyways I hear student loans are one of the main contributors to NPAs of these nationalised banks. Is that true ?

Student loans have students whose future earnings based on college coupled with parents as guarantor is there..
I think by Sep 2015, student loans in India is around 66K Crs and default ratio is just about 8.2% +/- 15-20 basis points approximately.

The problem is PSBs normally give collateral free loan for students whereas pvt Sector Banks take collateral and guarantors.

Due to sluggish job creation the defaults would be high. The better colleges give at least some placements which makes a chance for repayment. Similarly for good universities abroad give employment opportunities. Fortunately abroad study loans requires collateral due to IBA (indian bankers association) mandate which stipulates a cut off around 4.5-5 lacs beyond which you require collateral.

So loan defaults is highest in sub 4.5 lacs category... on top collateral free..

But now i think even Student PAN are taken into account for loan application.. This way they are screwed life long till they do a One Time Settlement of some partial loan amount with the bank or repay them with interest and get a certificate stating all dues are cleared. Or else when you do a CIBIL check the loan default will keep appearing which now a days most companies use as a pre employment check and without proper justifications, job offers are withdrawn....

 

[Brahmaputra Mail]

Student loans have students whose future earnings based on college coupled with parents as guarantor is there..
I think by Sep 2015, student loans in India is around 66K Crs and default ratio is just about 8.2% +/- 15-20 basis points approximately.

The problem is PSBs normally give collateral free loan for students whereas pvt Sector Banks take collateral and guarantors.

Due to sluggish job creation the defaults would be high. The better colleges give at least some placements which makes a chance for repayment. Similarly for good universities abroad give employment opportunities. Fortunately abroad study loans requires collateral due to IBA (indian bankers association) mandate which stipulates a cut off around 4.5-5 lacs beyond which you require collateral.

So loan defaults is highest in sub 4.5 lacs category... on top collateral free..

But now i think even Student PAN are taken into account for loan application.. This way they are screwed life long till they do a One Time Settlement of some partial loan amount with the bank or repay them with interest and get a certificate stating all dues are cleared. Or else when you do a CIBIL check the loan default will keep appearing which now a days most companies use as a pre employment check and without proper justifications, job offers are withdrawn....

So the bank literally screws the student using his PAN card number.

 

[The_Sidewinder]

Presence of crude oil in Karbi Anglong confirmed

DIPHU, Feb 5 - Presence of crude oil in Karbi Anglong hill district has been confirmed by the Oil India Limited.

In this regard, senior officials of the Duliajan-based Navaratna company, Oil India Limited (OIL) have been taking stock of the situation here since the last two days.

Senior officials of the OIL led by Diponjoy Daulaguphu, Tridip Hazarika, Diganta Borah, Pallav Borgohain and MR Deuri met officials of Karbi Anglong Autonomous Council (KAAC) and the district administration on Thursday and apprised them about the availability of crude oil in the eastern part of Diphu, like Dilaji, Doldoli, Dhansiri, Rongapahar and Maisibailam areas.

They informed that earlier the aforementioned areas along with their hydrocarbon reserves had been detected and accordingly surveyed for their exact location.

Meanwhile, both KAAC and the district administration have assured to provide full support to the OIL team in the hydrocarbon extraction process as the drilling operations will subsequently help to boost the socio-economic condition of the district as a whole.

The OIL officials said that the extraction process will start after the ensuing State Assembly elections.


@PARIKRAMA @zootinali @Tshering22 @The_Sidewinder @debabratbarman

This is not a surprise at all. We all know that NE has abundance of natural resources. Its upto state & central govt to utilise these resources to the max & use the revenue for betterment of NE.

 

[Tshering22]

it depends on how many of them get jobs in the company.Usually they are welcoming if local youth get preference for jobs. Like everyone they dislike it when even for menial jobs , people are "imported" from outside. They tend to cooperate if some of them have any position in the company.

Jobs are given on the basis of skill and qualification.

This is not just hte problem in our region but across India that people have this 'our land our people best job' mentality.

Which is why PSUs are in a mess as they are forced to hire people who have limited skill in high posts and thus suffer inefficiencies.

This mindset has to change.

This is not a surprise at all. We all know that NE has abundance of natural resources. Its upto state & central govt to utilise these resources to the max & use the revenue for betterment of NE.

I really hope the new upcoming Assam state government uses this new-found wealth for the state's progress and not squander it off in foreign banks of CMs.