The Telegraph
Since 1st March, 1999
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SBI stings hotel with Ordinance

Mumbai, Nov. 12: In the first seizure under the Securitisation Ordinance aimed at ferreting out bad loans, State Bank of India (SBI) has taken possession of a Nasik hotel that had been dodging payments.

“The hotel has been seized by us under the Ordinance two days ago after the mandatory 60-day notice expired,” bank officials told reporters here today.

The promoters of the hotel — The Plaza — did not repay loans and interest worth Rs 11 crore, which left the bank with no option but to vacate and seal the property.

“Despite reminders, the promoters failed to honour their commitment,” said an SBI official. It was the new powers vested with the bank under the Ordinance that enabled it proceed against the hotel owners,” the official said.

State Bank will soon issue a notice of sale for the 66-room hotel owned by Soni Tourism Private Limited, along the Nasik-Mumbai highway, around hundred kilometres away from the country’s commercial capital. Nasik is home to several engineering companies and a key milestone on the way to pilgrim centres.

Now, bids will be invited from companies that want to purchase the estate. “We are not interested in keeping assets. Our priority will be to dispose as early as possible,” officials said.

They said some defaulters are now coming forward to repay loans and the bank was confident of recovering substantial sums by enforcing the Ordinance.

State Bank’s Mumbai circle has issued notices in 38 cases with outstanding dues of Rs 979 crore and, if payments are not made within 60 days, it would take possession of the assets pledged to recover dues, officials said.

For SBI, the first seizure through the Ordinance, which gives lenders enough powers to seize properties belonging to errant borrowers, will be a test of kind and the results of the case will eagerly watched by banks. “It will create a precedence of sorts. SBI has to follow it up to its logical end,” a senior bank executive said.

SBI officials said the ordinance has forced many recalcitrant borrowers to seek fresh terms to repay their loans.

Infact, several banks have sent notices to errant borrowers, who have pleaded that banks should consider the present economic downtrend before resorting to harsh measures.

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