Come April, the entire credit market could see a marked change. For starters, farm loans will be extended at a bank’’s base rate. In addition, the market for short-term loans will shrink. Unlike now, when banks are offering less-than-a-year loans at 6-7 per cent, the lenders will not have the freedom to lend below the base rate from April.

From all available indications, the base rate for most public sector banks will be around 9 per cent and they will be unable to offer below that rate.

“The base rate will put an end to cross-subsidisation. All the rates above the base prime lending rate (BPLR) will now come closer to the base rate and sub-BPLR loans will move above the base rate. Banks will have better bargaining power and bargaining will be more scientific,” said Punjab National Bank Chairman and Managing Director KR Kamath.
Punjab & Sind Bank Chairman and Managing Director GS Vedi said base rates would bring in more transparency and would be beneficial to the borrower.

In a note, ICICI Securities said if the Reserve Bank of India’’s draft guidelines were implemented from April, as proposed, the new norms might affect short-term borrowings by non-banking finance companies and some companies, as their current short-term borrowing rates were lower than the base rate for most banks.

“Bankers were mispricing loans under the present system. Sub-BPLR lending for loans up to Rs 2 lakh, which is proposed to be permitted, will help improve availability of credit and pricing for small borrowers,” added Union Bank of India Chairman and Managing Director MV Nair.

“SME (small and medium enterprises) borrowers, who got loans at higher rates, will be able to reduce their cost of borrowing,” Indian Overseas Bank Chairman and Managing Director SA Bhat told a news agency. At present, SMEs are availing credit at around 14-16 per cent.

In addition, a private sector bank executive said banks would exercise the interest rate reset option at faster frequency, as the base rate would be more dynamic. Given that it will be linked to the cash reserve ratio, which RBI uses as a tool to periodically adjust liquidity and the cost of deposits, the rates are going to be more dynamic. Besides, it will also be a function of loan demand and the amount of liquidity available in the market.

For instance, given that banks are parking around Rs 75,000 crore to Rs 80,000 crore through RBI’’s reverse repo window used to suck out excess liquidity, they are expected to continue maintaining higher than the prescribed 25 per cent statutory liquidity ratio. “The market for short-term loans will shrink, but banks will look to invest more in corporate bonds and commercial papers given the restriction on lending below the base rate,” said Corporation Bank Chairman and Managing Director JM Garg.

But there are some issues on which bankers are seeking greater clarity.

“It is unclear whether the tenor premium can be considered as tenor discount. For instance, if I want to lend for short term, it doesn”t make sense to add a tenor premium to my base rate. Any lending for a tenor below my base rate tenor should have a tenor discount,” the chief financial officer of a private sector bank said.

Besides, some of the lenders will approach RBI to put curbs on sub-base rate lending in phases. “It will affect our overall structure given that majority of the loans are below the existing benchmark rate,” said an executive at one of the largest banks in the country.

Corporation Bank’’s Garg said the bank would see yield on advances rise marginally from the present level of 10 per cent, as 80 per cent of the loans were extended below the prevailing BPLR. “On short-term loans, I was earning 6 per cent, which will be 9 per cent or higher from April,” he said.

But, as far as margins are concerned, PNB’’s Kamath said it would be zero sum game.
Meanwhile, at a meeting with bank chiefs on Thursday, RBI said that lenders should be ready to roll out the base rate mechanism from April and added that it would address any concerns that banks had.

Introduction of base rate will result in sharp reduction.
Bankers are still busy with their calculators trying to work out the proposed base rate that the Reserve Bank of India (RBI) plans to introduce from April but they estimate the benchmark rate will decline to around 9 per cent from 11-15.75 per cent at present.

State Bank of India, the country’s largest lender, has estimated its base rate at around 9 per cent against the prevailing benchmark prime lending rate (BPLR) of 11.75 per cent. Ditto for Union Bank of India.

Similarly, a Bank of India executive said the base rate will be around 300 basis points lower than the prevailing BPLR of 12 per cent.

Corporation Bank sees it a tad higher, while Allahabad Bank and Punjab & Sind Bank expect the rate to be between 9 and 10 per cent.

Last evening, RBI issued draft guidelines that proposed to shift from a system of benchmark prime lending rate to a system of base rate from April.

RBI has proposed that banks calculate the base rate on the basis of the cost of funds, overhead costs, adjust for the “negative carry” for funds impounded for the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) and add a profit margin.

The main ingredient will be the cost of deposits, with banks that have lower costs, such as SBI, having an edge over the others. “Given that the base rate will be a function of the cost of deposits and operating efficiencies, banks with higher Casa (current and savings account balances) and lower cost-assets (ratio) will benefit as their base rate would be lower than industry average, thereby allowing them to earn higher spreads on their products,” ICICI Securities said in a note.

At the same time bankers warned that the rates they have calculated are based on the present cost of deposits. “It base rate may vary every quarter because of cost of funds, CRR and SLR. It will become very dynamic and can change on quarterly or even on a monthly basis,” said Corporation Bank Chairman and Managing Director JM Garg.

The adjustment for negative carry on CRR and SLR will result in a gain of around one percentage point for banks.

While Union Bank of India Chairman and Managing Director M V Nair, who is also the chairman of the Indian Banks” Association said that the move will bring about more transparency in pricing, bankers said, it will put an end to the bargaining power of large companies. That is because RBI wants to put an end to sub-base rate lending for all segments other than export finance and directed rate of interest (DRI) scheme for low income groups.

Bankers said only large public sector companies and AAA-rated private players would be able to avail of loans at base rate. Similarly, only short-term loans such as working capital will be available at the base rate.

Short-term rates for large players may go up, but the good news is that bankers expect the lending rates for small and medium enterprises to fall.

“Even that will be a function of demand and supply, if the credit demand is high and liquidity is tight, then the best borrower will also have to pay a premium,” said Corporation Bank’s Garg.

Chinese authorities signaled Wednesday that bank lending would slow significantly this year, the latest in a series of moves intended to forestall inflation and stave off bubbles in the stock and property markets.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said he expected Chinese banks to extend loans totaling about 7.5 trillion renminbi ($1.1 trillion), a decline of nearly 22 percent from the record 9.6 trillion renminbi lent last year.

“This year we will continue to control the pace and demand of the credit supply,” Mr. Liu said at a conference in Hong Kong, The Associated Press reported. He added that regulators were paying special attention to loans for local government projects and real estate. All banks, he added, had been ordered to “heighten their vigilance against an impossible, embedded credit risk.”

Stock markets in China and Hong Kong fell on the news. The Shanghai composite index, the main gauge of the mainland Chinese market, ended 2.9 percent lower, while the Hang Seng index in Hong Kong dropped 1.8 percent.

Shares in Bank of China and China Construction Bank sagged 3.4 percent and 3.1 percent, respectively, in Hong Kong, while Industrial and Commercial Bank of China fell 2.6 percent.

Still, economists said the signal from Chinese policy makers was neither surprising nor drastic and showed that Beijing was “tapping on the brakes” rather than engineering a major policy reversal.

“The 7.5 trillion renminbi target for this year is hardly an insignificant amount by anyone’s definition,” said Patrick Bennett, a strategist at Socit-Gnrale in Hong Kong, adding that he believed the market reaction had been excessive.

“Bank lending has apparently been strong in the first weeks of the year,” Mr. Bennett said, “and the recent policy moves and announcements are clearly designed to deal with that at an early opportunity.”

A government stimulus package worth 4 trillion renminbi ($645 billion), coupled with the spree of easy credit as the country’s state-owned banks were told to lend freely, helped China stave off a sharp economic slowdown last year.

The easy cash has helped drive a rapid rise in China’s stock and property markets, while feeding concerns that some of the loans extended by eager banks may turn sour.

Inflation has been on the rise as the Chinese economy has picked up speed, adding to the pressure on the authorities to temper economic activity and limit price increases.

Zhu Baoliang, chief economist for the State Information Center and a senior government official, said Wednesday that consumer price inflation had accelerated “significantly” in December and was likely to average 3 percent this year, Reuters reported.

At the same time, exports, a main driver of China’s economic growth, rebounded more quickly than expected at the end of last year, giving the authorities more leeway to unwind some extraordinary stimulus measures.

In another recent action to scale back lending, the Chinese central bank ordered state-owned banks last week to set aside a bigger share of their deposits as a reserve against failed loans – 16 percent for larger banks, an increase of half a percentage point. Smaller banks reserve requirements were raised to 14 percent, from 13.5 percent.

The central bank raised the rate on a closely watched interbank loan this month, and it raised the rate on its one-year bills. Analysts also expect China to start gradual increases in the benchmark lending rate – a more sweeping policy tool – though that is not expected until the second half of the year.

So far, only a handful of countries, including Australia and Norway, have begun to nudge up interest rates as their recoveries have taken hold.

The Central Bank of Nigeria (CBN) has left its benchmark interest rate unchanged in its bid to ease credit shortage caused by last year’s banking crisis.

Speaking at a briefing in Abuja, the CBN Governor, Lamido Sanusi Lamido, said though the monetary policy rate was held at 6 per cent, the key rate was last cut by 1.75 percentage points in April.

The CBN, last year, bailed out the banking industry at a cost of N620bn ($4 billion) to ease a credit squeeze, while sacking eight bank chief executive officers. The bank expects senate to approve the creation of a company to buy bad debts from commercial banks in about three weeks, Sanusi said today.

The purchases will ’stimulate activity in the capital market’ and improve banks’ balance sheets, Sanusi said earlier.

Eurasia Group, a New York-based research company, stated that Nigerian banks may have as much as $10bn of toxic assets, while the Bank of America Corp pointed out that Nigeria’s All Share Index tumbled 34 per cent last year after declining by 45 per cent in 2008.

“The bad debt is partly the result of, at least, N1trn of margin loans used to buy shares.”

But, according to Pabena Yinkere, an analyst at Access Bank Plc, he believes that what the CBN is trying to do is improve liquidity and increase confidence in the financial system.

“The proposed company would be a win-win for everybody so that banks can begin to lend again, companies can resume normal activities and the economy can grow.”

A bank foreclosure is a legal action that can be initiated by a financial institution when an individual or family cannot meet the binding terms of a mortgage. A mortgage is a legal financial contract between the two entities. One of those entities is the lender and the other entity is the borrower. Through the mortgage each of the parties agrees to terms that are expressed as outlined in the mortgage. When those terms are not met, there are options that are available.

One of the major agreements that the borrower pledges to fulfill is the payment of the mortgage. The payment is a set amount of money that is generally due on a certain day of the month. If this obligation is not met then that borrower is said to be in arrears. If a number of payments are not met, then, according to the terms of the mortgage, a bank foreclosure action may be initiated.

A bank foreclosure is a seldom pleasant legal action to take and even worse to be experienced by the homeowner. A bank foreclosure culminates in the home being repossessed by the bank. The bank then turns around and sells this property so that it can recoup the loan. A bank foreclosure is necessary to maintain the financial integrity of the bank and to protect the interests of its investors and the Board of Directors of the bank.

Despite the fact that a bank foreclosure is extremely painful for the family that loses their home, there are some positive possibilities. Those possibilities are available to the person who has the resources to purchase a home that has been foreclosed by a bank.

Advantages Of Buying A Foreclosed Property
The chief advantage of buying a home that has gone through a bank foreclosure is the fact that the bank wishes to turn around a property as quickly as possible. This is because they are not in the home owning business, but the lending business which provides them revenue through interest gained off of the home loan.

Therefore, purchasing a foreclosed property is conducted through a bidding process with the highest bidder receiving the property. This procedure is often to the advantage of those that are bidding on the property. Generally, a foreclosed home can be purchased at a five to 50% discount from the appraised value of the home in the housing market.

Once the home has been purchased by the highest bidder there are a number of options available to the new owner. Those options include the use of the home as their residence, using the residence as a rental property or upgrading the home through improvements and selling the home for a profit.

Finding A Bank Foreclosure
There are many sources available to the consumer when searching for foreclosed homes. Those resources include actual listings from the financial institutions, realtors and brokers and Government agencies. In addition there are a number of web sites available on the Internet that will provide a foreclosure listing for your interested geographical area.

In addition, another source of negotiating for a home that is going through a bank foreclosure is the actual homeowner. Locating those homeowners who are unable to meet the terms of the mortgage can be found in separate listings that are labeled as pre-foreclosure properties. The only difficulty with this option is that you will be dealing directly with the family which may prove to be a negative emotional experience. In addition, dealing directly with the homeowner may prove to be a lengthy process.

Leading offshore tax evasion defense experts help taxpayers disclose overseas funds, obtain FBAR compliance and reduce penalties as the IRS is more determined than ever to smoke out tax revenue from offshore hiding places.

Encino, CA, December 10, 2009 – More than 14,700 Americans with secret offshore accounts took the IRS up on their offer of tax amnesty for voluntary disclosure before the October 15th deadline, generating “billions of dollars” in new revenue for the IRS. Based on this success, the IRS has hired 800 personnel in the United States and bulked up their offices overseas to smoke out more tax revenue from offshore hiding places.

“You may be a potential IRS target if you have an offshore bank account anywhere, not just in Switzerland,” said Brian Compton, President of Tax Resolution Services Co., (TRS). “It doesn’t matter if you have the account for Holocaust reparations, an overseas job, operating expenses for a vacation home, or funds from a married spouse from another country you could be the next victim of the IRS’s intensified federal crackdown on offshore accounts.”

TRS recently announced the launch of its specialized Offshore Banking and FBAR Defense Division headed by Compton, one of the nation’s leading offshore tax evasion defense experts. Compton personally oversees all offshore tax evasion defense cases and works closely with the firm’s team of IRS and legal experts (tax attorneys, CPAs) to help clients disclose overseas funds, obtain FBAR compliance and reduce severe IRS penalties.

According to Compton, IRS back tax penalties for offshore accounts can add up to double or triple the amount that is hidden in those accounts. If you think your offshore bank account may be a potential IRS target, it’s important to follow the IRS’s disclosure guidelines to avoid huge fines and penalties, including jail time.

“If you contact the IRS yourself, any mistake you make can have severe consequences,” Compton said. “Tax evasion carries a five-year sentence, while failure to file FBAR reports is punishable by a 10-year sentence?? so you will need an experienced FBAR tax attorney or tax resolution specialist on your side.”

Tax Resolution Services is dedicated to providing affordable solutions to businesses and individuals who find themselves in trouble with the IRS. Their team of expert tax attorneys, enrolled agents and CPAs has a success rate of 90% – second to none in the industry – and an Offer in Compromise Settlement Rate of $0.13 on the dollar.

No one plans on dramatic financial changes, but they happen. When changes do arise to an individual in Chapter 13 bankruptcy, they might be misled into believing there is no other option than sticking to their schedule of set monthly payments. But they might be surprised to find that Chapter 13 bankruptcy has a great deal of flexibility.

Before we discuss options, it is important to note that payments are not something you want to ignore. You must make all of your Chapter 13 payments in full and on time because if you do happen to miss a payment, the trustee in charge of your case may drop or dismiss your case. Were that to happen, the court cannot protect your property from creditors. However, if you decide that you no longer want to make payments on your Chapter 13 bankruptcy, you do have options.

For starters, you can convert the Chapter 13 bankruptcy into Chapter 7. If they do convert the case, the debtor no longer has to make Chapter 13 payments. An example where this might be a good option is if a person filed for Chapter 13 for a very specific reason, such as trying to catch up on a car loan or home mortgage to prevent a loss from foreclosure. However, if the debtor still cannot keep up with payments in Chapter 13, it wouldn’t make sense to make payments any longer, and Chapter 7 would be a favorable alternative. If you are represented by an attorney already, however, you do not want to convert your case without first speaking with your attorney.

The second option, if you no longer want to make payments on your Chapter 13 bankruptcy, may be a voluntary dismissal. This is an option that is usually available to debtors at any time. If a person filed for Chapter 13 in an attempt to catch up with car or mortgage payments and is successful, they may no longer want to be in Chapter 13. In this option, debtors are no longer required to make monthly payments. However, if this is carried out before, they will not receive a discharge.

Another option is to amend the Chapter 13 plan. Options in amending the plan can be as simple as adjusting the payment schedule, reducing the monthly payments, or even extending the length of a plan. There are some limitations on these changes. For example, you cannot extend the length of the plan for more than five years from the time of your first payment. However, if you have a reduction in pay due to a decrease in income, the amount of your monthly payment can be changed. The process involves a motion to amend the plan to the Chapter 13 trustee and all involved creditors.