An NPA account is a worst nightmare for a businessman, which requires immediate conversion to a normal account in order to enjoy standard banking facilities to run his business properly.
It never makes a business flourish and hinders its growth in many ways. NPA Borrowers can’t run the current accounts and no bank or NBFC extends any loan facilities to such borrowers. Above all, the bank’s legal process to recover the outstanding amount, like the possession & sale process of collateral, takes the borrower’s sleep away.
Every NPA borrower tries to convert an NPA account to a normal account. However, the question arises of how to do this, as it seems to be one of the most difficult tasks in the financial market. But, there are certain ways through which an NPA borrower becomes standard. We evaluate the following ways as per the current market & banking policies to help you with your goal:
Five Ways to Convert an NPA Account to a Normal Account
1. Restructure of NPA Account:
This is one of the best ways to convert one’s NPA account to a normal account. The borrower can approach their bank & apply for restructuring of their loan. As per policy, a bank can reschedule the repayment tenor & also reschedule the EMIs. This may also include extending the loan tenure, reducing interest rates, or offering a moratorium period.
In some cases, the bank also demands depositing some money to cover interest & penalties levied on that account to make it standard. The principal balance amount after recovering all the charges will be rescheduled for the coming years in EMIs.
Through loan restructuring, banks may convert all non-fund-based facilities like bill discounting loans, bank guarantees, and LC, into term loans, while the fund base remains the same.
Important Note: The bank/lender will evaluate the borrower’s repayment capacity before allowing restructuring.
2. Repaying the Entire Interest & Principal:
In one order, the RBI(Reserve Bank of India) makes it clear that NPA classified accounts can only be upgraded to standard accounts by paying overdue interest along with the entire principal of the account. And if a borrower has multiple loan accounts with the bank, he needs to pay overdue interest along with the total principal in all loan accounts. So, the borrower needs to repay the total loan with interest in order to convert the NPA account to a normal account.
Click Here To Refinance Your NPA Account
3. One Time Settlement(OTS):
One-time settlement is a tool used by banks to reduce bad loans from their books by offering a lower amount to NPA borrowers under a settlement scheme, This encourages borrowers to pay huge outstanding amounts at reduced prices & in a lump sum manner to close the NPA account. Banks time to time, offer OTS schemes to NPA borrowers. In general, borrowers can also approach their banks for a one-time settlement scheme or OTS. In this way, they can close their NPA account at a reduced amount.
4. Selling the Collateral/Properties to Pay off the NPA:
The borrowers can request their banks to allow them to sell their collateral or properties in order to clear their NPA outstanding. One can also apply for an OTS with the permission to sell the assets in order to complete his commitment. This can be done with the help of a tripartite agreement between the bank, borrower & property buyer. This agreement safeguards the buyer and gives him confidence for paying the bank directly.
Also, the borrower can submit a list of assets to be sold in a phase-wise manner, so the bank can release the collateral on a pro-rata basis.
5. Taking a Loan for clearing the NPA Account:
Suppose a borrower does not have ample funds or does not want to sell off their hard-earned properties to pay the bank. In that case, the solution is to take an NPA finance loan from the institutions that offer such services or products for NPA account holders. This can clear out the NPA outstanding and offer a structured repayment over a long period of time.
But finding such a type of company is a real headache, as today every financial consultant claims that they can arrange the finance for taking over the NPA account, but this is a total mess as they start searching & sharing your documents within their circle or in the open market.
So it is advisable to look for a company which must have past experience in such transactions & is well knowledgeable on the subject. To my knowledge, there is a company known as “Fund Source India” to help you with this. They are well knowledgeable & have vast experience in financing the NPA accounts and clientele in all major cities. So, you can refinance and close your NPA account completely.
They also offer private loans against property for borrowers with issues in their credit rating.
Conclusion
As per the banking norms, a complete closure of the NPA account, including the entire principal & interest through any means of funds like own savings, the sale of property, or through refinancing your NPA account, helps convert the NPA account into a normal account. And the companies, like “Fund Source” can arrange funds for such NPA borrowers to close their NPA accounts completely.
