The bank loan

Part I

I received a memo from head office today. It makes me nervous.

They have marked Surya homes private limited as a red-flagged account and have asked me to prepare a report for the Central Fraud Monitoring Cell.

Making it worse is the fact that this case will be directly reviewed by our Deputy General Manager, Mr Bharat, a long-timer in the bank known especially for his honesty.

Our exposure to Surya homes private ltd is not much. But there have been serious issues with this account. Their head office is empty and employees have been laid off. No one has a clue about whereabouts of their MD, Surya.

During the real estate boom 2 years back, things were different. Surya was a charming guy and his projects looked promising. There was a lot of pressure on me to grow our loan book. I was happy to be associated with a fast growing developer.

There were few lapses. Who doesn’t? Real estate is no place for clean business.

Once, they requested loan for a project. Two blocks were half-completed, they claimed. When I visited the site, I only saw deserted land. Surya laughed it off and  said it was just a minor delay. The blocks would appear within 4 months, he promised. 25% of the flats were pre-sold, he convinced me.

Times were good and selling a flat was easy. Surya was doing well. We  overlooked things like stressed balance sheets. This is nothing unusual in real estate and I cleared the papers.

Those blocks never appeared. It’s been 1.5 years now.

The problem arose when the real estate market crashed last year. The collateral they provided hardly covers 10% of the outstanding amount.

To make it worse, I have another headache. We have 62 retail customers to whom we have given out loans for flats developed by Surya homes. All of them were approved by me personally.

I wonder where Surya is.

Part II

I received a memo from our head office today. They have red-flagged Surya homes private limited and have asked me to review the report the bank manager will submit by end of this week.

Preliminary updates from the branch show that Surya homes has not made a payment in a year now and there have been several notices already. The last few notices have been returned as Surya homes office no longer exists.

21 out of 62 retail customers have lapses in payments involving Surya homes apartments. Given the recent developments, the branch expects things to worsen.

Though the exposure to Surya homes is somewhat high at the branch level, it is insignificant when compared to the overall NPAs our bank has.

In any case, it is going to be bad for everyone involved in the branch, especially the manager who approved the loans personally. I feel sorry for him.

They are not going to track down Surya or recover the loans back.

How do I know?

I know because I am the real owner of Surya homes private limited, behind all those names that lead nowhere!

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