All about Non Performing Accounts (NPA)
What is an NPA loan? An NPA, referred to as Non-Performing Asset, is the loan account on which a borrower fails to repay the interest/EMI for equivalent or more than the 90 days is known as NPA account for the bank. This is a loan from which the bank is not getting the return & creates a loss to the bank. Banks provide loans to borrowers and consider these loans as their assets. These loans generate income for banks in the form of interest, usually collected through monthly EMIs or interest payments. However, if someone fails to repay on time, the bank stops earning income from that loan. In such cases, the bank labels the loan as a “Non-Performing Asset” (NPA).According to the guidelines of the Reserve Bank of India (RBI), if a loan account remains overdue for more than 90 days, it is classified as an NPA. Furthermore, the bank starts monitoring the account from the very first instance of non-payment. Click Here to get finance for your NPA Account SMA 0 Principal or interest overdue under 30 days SMA 1 Principal or interest overdue more than 30 days SMA 2 Principal or interest overdue for more than 30 days NPA Principal or interest overdue for more than 60 days The main objective behind this classification is to take appropriate steps to prevent the account from slipping into the NPA classification. But, once the account is classified as a non-performing asset. Banks start to recover the loan through other legal ways like issuing legal notices to borrowers, taking possession & auctioning the underlying securities/collateral under the Sarfasi Act 2002. What is the SARFASI Act 2002 The Sarfasi Act enables banks & financial institutions registered under the RBI to sell or auction the borrower’s properties/assets in the event of default to recover their loan without any court intervention. The Sarfasi Act only applies to secured loans & agriculture properties/land do not fall under this act. An order from the court is not required for the selling or auction of collateral, so the bank can liquidate collateral via the auction process in a shorter time. Bank reduces its NPA ratio by enforcing the Sarbani Act. Legal Notices issued by the Bank to borrowers under the Sarfasi Act Impact of NPA Impact of NPA on the Borrowers When a loan account is classified as a non-performing asset, it creates lots of financial & legal issues for borrowers. In general, borrowers face the following multiple issues : Impact of NPA on the Banks Non-performing assets (NPAs) have significant implications for banks, financial institutions, and the overall economy. Here are some of the key significances of non-performing assets: What are the options for Borrowers? Is there any financing option to close the NPA Accounts? If your loan has gone into NPA (non-performing asset) and you are looking for financing to repay your loan, the following methods can help you: These companies, like Fund Source, pay directly to your previous bank to close the NPA account, the total outstanding, or the NPA account settled under the OTS. The Key Benefits of these Loans: Click Here to get finance for your NPA Account
All about One Time Settlement (OTS)
In this blog, we learn about everything related to the One-Time Settlement (OTS) of loans. What is the full form of OTS in banking? OTS refers to the One-Time Settlement of a defaulted loan, for which the borrower stopped repaying the loan due to unavoidable financial issues in their business. What is the One-Time Settlement? A one-time Settlement is a legal contract between a financial institution (bank) and its borrower to settle a Non-Performing Loan (NPL) at a reduced price. This is beneficial for both parties, as the bank reduces its bad loans, and the borrower gets rid of all the legal and financial issues associated with them. OTS in Banking: Through OTS, the bank reduces its overall bad loan ratio & works towards better managing its balance sheets. It also benefits the bank in the fast recovery of its funds and frees up the resources to better focus on its core activities. The borrower also steps towards better management of his business & finances, and can be eligible for standard banking products and services necessary for managing the business. OTS Scheme From time to time bank also offers the OTS scheme to its NPA borrowers to recover its bad loans and clean their balance sheets by reducing NPA ratios. The OTS scheme offerings are totally at the bank’s discretion, but however, the borrower also asks the bank for OTS & shows his intention to pay the loan. This way, borrowers also get the benefit of repaying their outstanding loans at a reduced price. The banks like PNB & SBI offer time-to-time OTS scheme to their NPA account borrowers. Here are some key points to understand about a one-time settlement: Options for Borrower (for payment of OTS) One Time Settlement Loan or OTS Loan Once the OTS is approved, the borrower can approach the market for a one-time settlement loan. The new lender issues an OTS loan and pays directly to the previous bank on behalf of a client for the successful closure of the OTS. This way, the borrower can successfully close the previous liability along with all the legal & financial issues related to that particular account. This also once again opens the gate for the borrower to make his loan a standard asset & to enjoy the facilities & products of standard banking, which was earlier restricted because of NPA status. Here are a few key features of OTS Loan : Now, let’s see what the points are to remember when opting out of a Loan for OTS : Conclusion: One-time Settlement(OTS) is one of the best tools to emerge from NPA situations and the associated legal & financial issues with that account. If one has a clear intention about repaying their NPA loan, then they must consider the OTS. Additionally, the borrower requires a clear understanding of servicing his OTS through any of his borrowings, whether from friends & relatives or by monetizing his assets, or by planning to take a loan for this purpose. This provides complete closure of previous NPA account issues & one can restart their business/financial life after the successful completion of their OTS. Click Here To Get a Loan For One Time Settlement
Takeover of Asset Reconstruction Company Loans: Unlocking Opportunities for Financial Revival
Introduction: In the realm of distressed debt resolution, the takeover of Asset Reconstruction Company (ARC) loans has emerged as a strategic move for investors and financial institutions seeking to capitalize on the potential value of distressed assets. The process of acquiring ARC loans presents an opportunity to unlock hidden potential, drive financial revival, and create value for both lenders and investors. In this blog post, we will explore the concept of the takeover of ARC loans, its significance, and the benefits it offers to all stakeholders involved. Click Here to fund your ARC Loan Account Understanding the Takeover of ARC Loans: The takeover of ARC loans refers to the acquisition of distressed loans held by Asset Reconstruction Companies (ARCs) by investors or financial institutions. Through this process, the acquiring party gains control over the assets and assumes the responsibility of resolving the distressed loans to recover their value. The takeover is often driven by investors who possess the expertise, resources, and vision to maximize the potential returns from distressed assets. Key Aspects of Takeover of ARC Loans: Benefits of Takeover of ARC Loans: Conclusion: The takeover of Asset Reconstruction Company loans represents a strategic opportunity for investors and financial institutions to unlock the potential value of distressed assets, drive financial revival, and create value for all stakeholders involved. By identifying hidden value, resolving distressed loans, and revitalizing businesses, the takeover process contributes to the resolution of non-performing assets and fosters a healthier financial ecosystem. As investors continue to seek opportunities in distressed debt, the takeover of ARC loans remains a compelling avenue for capitalizing on potential returns while supporting the overall financial revival of distressed businesses and the economy as a whole.
Welcome to Our NPA Restructuring Services
In today’s dynamic economic environment, businesses often encounter the challenge of non-performing assets (NPAs). These NPAs can significantly impact an organisation’s financial health and hinder its growth potential. At Fund Source, we understand the complexities and consequences associated with NPAs. We offer comprehensive NPA restructuring services to help our clients overcome these hurdles and transform their non-performing assets into viable investments. Click Here to fund your NPA Account What is NPA Restructuring? NPA restructuring refers to modifying the terms and conditions of loans or debts extended to borrowers facing financial distress. This restructuring aims to revive the borrower’s financial position, improve repayment capabilities, and prevent the loan from being classified as a non-performing asset. Through strategic interventions and negotiations, NPA restructuring can help both lenders and borrowers find mutually beneficial solutions that enable loan recovery and support business revival. Our NPA Restructuring Services At Fund Source, we specialise in providing comprehensive NPA restructuring services tailored to meet our client’s unique needs and challenges. Our team of experienced professionals possesses in-depth knowledge of banking, finance, legal frameworks, and industry best practices. We work closely with lenders and borrowers to develop customised solutions that facilitate the revival of businesses and maximise the recovery of outstanding loans. Our services include: Why Choose Fund Source for NPA Restructuring? Contact Us Today If you are facing the challenges of non-performing assets and need expert assistance in restructuring your loans, Fund Source India is here to help. Our dedicated team of professionals is ready to guide you. Click Here to fund your NPA Account
How we helped Hyderabad Based client for the OTS Finance
This is about one of a our clients located in Hyderabad. We arranged the finance for his one time settlement with state bank of Hyderabad. For doing OTS Finance we are associated with some lending companies who are specially interested in financing such OTS transactions. Client was having business of spinning mills. The spinning mill was started in year 2003. After some initial years, mill developed business in fast pace and started exporting in 10+ countries. Their company turnover increased manifolds & attains a turnover of Rs. 200+ in year 2011. They are enjoying a credit facility from state bank of Hyderabad to the tune of Rs.62 crores. Their repayment to bank was running very well till year 2013. Click Here to finance for your One Time Settlement Due to all above factors, their turnover dipped very steeply and they are unable to repay installments & interest so their accounts in state bank of Hyderabad, slips in to the NPA. They requested and corresponds with bank mentioning above factors and why they are unable to serve interest on time. But, bank due to their strict policies unable to help them on this and issued notices under sarfaesi act 13(2) & 13(4) and demanded Rs.78 crores including interest & penalty. Wherein actual principal was Rs.58 crores only. Matter was aggravated and client approached the DRT court for stay & court on various backgrounds puts a stay on taking possession & auction of collaterals. Upon realizing that case is slipping from their hands, bank moves to NCLT court. After litigation & disputes, in year 2019 bank agrees for one time settlement with promise of waiving of all interest & penalties levied on the account. So they ask the client for formally apply for a OTS. So, client applied for OTS of Rs.50 crores but bank denies and asks to raise some more. So client once again applied for Rs.55 crores. Now, his application for one time settlement was accepted by bank and client got OTS letter of Rs.55 cr from bank with a timeline of six months. Now, the next struggle starts for arranging money for paying off OTS. Client already planned for liquidation of his few properties which was free from any bank mortgage & buyer was already finalized but only waiting for green signal from bank. So, client was having a arrangement of around Rs.30 crores that was infused by client. Now, there was shortfall of rs.25 crores. For which client starts searching in his local market of Hyderabad. But, he could not found a proper solution. But, one a consultant(suresh reddy) whom was contacted by client start looking on google and after one or two trials he approached us. He explained the complete case and shared the documents whatever available with him. He also made us contact the client directly and through video calls, we collected some more information & documents required in the proposal. Luckily client has another company in which same business of spinning mill was running but business turnover was very less because main turnover was in their flagship company which slips in to npa. After declaring their account NPA, bank freezes their accounts which makes them unable to run business. So they diverted some of the business in that company and his sales raised rs.114 crores. Also this company has light debt of rs.3.5 cr CC limit form KVB. Now, we planned for taking both of the company in this new loan of OTS finance. One was the NPA company and one company serves as financial pillar for this new loan. Loan will be raised through help of this new company as it is having good supportive balance sheet with positive cash flow. Financial liability will be served by this new company & properties(land, building & machinery) of previous npa company is taken as collateral for this loan. So, we started the process for this OTS finance, first we gather all the documents of both companies and officially login the case in one of our lending company specialized for such kind of OTS finance transactions. They deeply studied the case & met the client also does the due diligence of business. Also does the legal & valuations of all underlying securities/collaterals. After getting a positive response from their credit committee they issued a term sheet to client describing all terms & conditions for new loan. And after few negotiations between the parties, letter was accepted by client. And final due diligence was done with state bank of Hyderabad regarding previous loan papers personal guarantees, underlying securities & other terms & conditions. Once all due diligence completed they informed the previous bank about release of payment from their end and execute legal document for taking over previous loan & securities from bank. Also legal agreements & documentation is done with client. And after successfully completing all the documentation they disburse the amount directly to previous bank & all the collateral handed to new lender in proper timely manner.
NPA Finance: Common Challenges Faced by Borrowers and Lenders
However, here are some general issues related to Non-Performing Assets (NPA) finance or funding:
What is loan Against Property ?
A Loan Against Property (LAP) is a secured loan where a borrower offers their property as collateral to obtain funds from banks or financial institutions. It is one of the most popular credit facilities provided by banks to individuals and businesses seeking small to large amounts of money for personal or business purposes. This is a convenient financial solution that allows borrowers to leverage the value of their property without selling it. Its flexibility in usage and longer repayment tenure make it an attractive option for fulfilling personal and business needs. Let me know if you’d like any further refinements! A loan against property can be raised against the following types of collateral: Whereas, for giving a loan against property/collaterals, banks also require an established business and income to secure timely repayments. The bank will evaluate your eligibility based on various parameters such as the value of the property, financial repayment capacity, credit score, etc. Once the evaluation is complete, the lender will disburse the loan amount within a few days, and the property will be mortgaged througha simple mortgage or a registered mortgage as per their policy. Click Here to Get a Loan Against Your Property Loan against Property Interest Rate The interest rate on a loan against property depends on the lender, the loan amount, and the type of collateral offered by the borrower. It is usually lower than other forms of credit, such as personal loans or credit cards, as it is a secured loan. Generally, banks offer the lowest interest rates comparable to others, 8.5% to 9.5% NBFCs offer slightly higher interest rates, starting from 9% to 16% Loan Against Property Eligibility Documents Required for LAP Loan The following documents are generally required for availing a loan against property: Features & Benefits of LAP Loan:
How Does a One-Time Settlement Process Function?
A one-time loan settlement (OTS) is a process where a borrower and a lender agree to settle a loan for a lump sum payment, which is typically less than the full amount owed. Here is an overview of how a one-time settlement typically works: It is important to note that the terms of an OTS agreement can vary based on the specific circumstances of each case, and the settlement may have an impact on a person’s credit score and financial situation. Additionally, there may be tax implications associated with a one-time loan settlement, depending on the type of loan and the settlement amount. Does One-time settlement affect cibil score? Yes, a one-time settlement negatively impacts your CIBIL score. When you settle your loan, the bank marks it as “settled” in the report instead of “closed.” This indicates that you were unable to fully repay the loan, which is seen as a sign of financial distress. As a result, your CIBIL score remains negatively affected for up to 7 years.
One-Time Loan Settlement: Pros And Cons
One-Time Loan Settlement (OTS) is a process in which a borrower and a lender agree to settle a loan for a lump sum payment, typically less than the full amount owed. This type of settlement can be used to resolve a loan that is in default or past due, or to simplify the loan repayment process. Click Here to finance for your One Time Settlement In a one-time loan settlement, the borrower agrees to pay a lump sum payment to the lender in exchange for the forgiveness of the remaining debt. This can result in a lower overall debt burden and lower monthly payments for the borrower. However, it can also be expensive, as the borrower may have to pay a large portion of the debt upfront. The success of a one-time loan settlement depends on the agreement between the borrower and the lender, and it is important for both parties to understand the terms of the settlement. It is advisable to seek the advice of a financial or legal professional before entering into a one-time loan settlement agreement. Pros of One-Time Loan Settlement: Cons of One-Time Loan Settlement: Click Here to finance for your One Time Settlement
Facts and circumstances of Supreme Court’s judgments about OTS
The Supreme Court of India has made several judgments regarding the one-time settlement (OTS) of loans, and the specific facts and circumstances of each case have influenced the outcome of the judgment. Click Here to finance for your One Time Settlement In some cases, the Supreme Court has upheld the rights of banks and financial institutions to recover their loans through legal means, including the OTS finance. The court has emphasized the importance of proper documentation and transparency in the loan settlement process. In other cases, the Supreme Court has ruled in favor of borrowers, emphasizing the need for fair and reasonable loan settlement terms. The court has also considered the overall financial situation of the borrower and the potential impact of loan settlements on their ability to repay other debts. It is important to note that the Supreme Court’s judgments in this matter can vary based on the specific facts and circumstances of each case, and it is advisable to consult with a legal expert for a more accurate understanding of the impact of these judgments on a particular loan settlement situation. What was held by the court in these OTS judgments? The Supreme Court of India has made several judgments regarding one-time settlement (OTS) of loans, and the specific holdings of each judgment have varied based on the facts and circumstances of each case. In general, the Supreme Court has held that: It is important to note that these holdings are not applicable in every case and may vary depending on the specific facts and circumstances of each case. Therefore, it is advisable to consult with a legal expert for a more accurate understanding of the impact of the Supreme Court’s judgments on a particular OTS situation. Click Here to finance for your One Time Settlement
