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Facing a Potential Hit Banks planning to approach RBI

No Comments Sub Category:Uncategorized Posted On: Jul 25, 2011

Land acquisition in Sahberi and Patwari, where over 30,000 apartments and plots were sold, has been declared illegal by courts. The Allahahad High Court is due to hear cases regarding more villages this week, but the fate of nearly 70,000 apartments in Noida Extension is uncertain.

Demands for higher compensation have spread to neighbouring areas too. Builders, who were already stretched given the increase in input costs and a slowdown in demand due to the rise in prices as well as interest rates, were a bigger worry for lenders. Banks fear that some of the developers may use the court ruling as a ground to defer payments.

Facing a potential hit on nearly Rs 10,000 crore lent to builders and home buyers in Noida Extension, banks are planning to seek a special dispensation from the Reserve Bank of India to do without setting aside funds for possible default on these loans. The issue is expected to be taken up at the level of the Indian Banks’ Association, the industry lobby group, whose management committee is due to meet this week.

Bankers, however, said that so far they had not faced any trouble in getting their dues as individuals usually stick to repaying loans. Around the time the HC decides on the petition for other villages in Noida Extension, bankers will discuss the prospect of IBA approaching authorities in Noida, Greater Noida and other government agencies to work out a solution that is beneficial to the interests of buyers and builders.

Economic Times

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