Life is full of challenges; one of them is NPA situation. This comes when someone defaults in bank or nbfc loan. This is very critical as it kills few years from progress of professional life and financial progress. It also kills the huge amount of money in terms of heavy interest & charges levied by bank/nbfc. Also, takes away your sleep, due to legal actions taken by bank through DRT & NCLT proceedings or through their sale process of collateral.
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So how to get out of this Situation or Status. One of the best ways is to approach the bank for OTS or One Time Settlement of your Loan. Here is one case study: One of our clients was NPA from some nationalize bank with outstanding of Rs.22.58 cr. Clients asks for finance arrangement of Rs.17.00 cr as they have arrangement of Rs.5 cr with them. We studied the whole case found that: out of total outstanding of Rs.22.58 cr, principal amount was Rs.17.02 cr and collateral valuation was somewhere around Rs.40 cr. As per our industry rule, we can only fund up to 50% of market valuation of collateral and we know from our experience the final distress valuation must be come around Rs.34-35 cr. We suggested client to apply for a One Time Settlement (OTS) in bank. We suggested applying for OTS of Rs.17 cr and also giving a 10% cheque as token amount of OTS. As per suggestion, client applied for OTS of Rs.17 cr and also simultaneously applied a proposal for funding with us.
But bank gave an OTS of Rs.17.58 cr & given time of three months. Client accepted the OTS and now, trying for funding with us for amount of Rs.12 cr as Rs.5cr was already with client. After ups & down of loan process, we finally managed to get loan sanction for Rs.12 cr. We paid Rs.12 cr directly to bank & Rs.5.5 cr was deposited by client. In this way, total OTS amount was given to bank and all the securities come to us. Let’s see how client benefited out of this OTS & funding:
• Client saves Rs.5 cr by going through One Time Settlement (OTS)
• Client not only saves Rs.5 cr, but also saves interest on 5 cr( if takes a loan of Rs.17cr)
• Client gets moratorium period for six months
• Client gets a total tenor of Five years for repayment
• NPA status will be wiped from day one
• New track record of loan started with us
• Client gets immediate relief from DRT proceeding
• Not only, successfully saves his valuable assets of factory but also nest of family, his House property
