OTS is a tool widely used by banks to reduce NPA from its book. But, above that it is also beneficial for NPA Clients. Bank can offer or may be requested by client to lower down the total outstanding in NPA account under OTS, so client can pay off the total loan in short frame of time like 3 to 6 months.
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OTS
Through this tool, client get waiver of 20-50% in total loan outstanding. This helps in paying off dues in completely.
It’s a situation, when a borrower takes loan from bank for any of business purpose with positive business growth in mind. But due to unforeseen future situations in business and failure in generating revenue or profit as required for repayment of loan. So, if clients fails to repay loan installments more than three months, then bank categorized/marked this loan as NPA (Non Performing Account).
Then, there are lot of interest and other charges like legal & recovery charges levied on that account, which makes it huge amount for payment. And client already under financial stress feels really very hard to repay this huge outstanding of bank. So, in these cases, client reserve the rights to apply for OTS –One Time Settlement in bank in order to reduce this huge outstanding. So, bank also considers giving waiver on interest & charges levied on that account & give approval on OTS application applied by client.
Time to time bank also offers OTS to individual client or in bulk under some schemes. Like in the year 2020, SBI come with the “Rinn Samadhan 2020-21” OTS finance Scheme for NPA account holders. Similarly, in year 2021 PNB launches special OTS Scheme for clients who could not repay their loan due to pandemic. Normally, all bank offers or operates One Time Settlement(OTS) Scheme to recover dues in NPA accounts & to manage NPA in their books. This scheme also beneficial for borrower as they need to pay a lower amount. All the borrowers who are not marked as willful defaulter can apply for OTS.
How can apply for OTS :
a) First of all, client need to draft a OTS application to apply. In this application, mention a amount whatever you find appropriate along with suitable reasons for that. Client can also disclose the time frame in which he can repay the entire mentioned amount.
b) Along with this application, client need to deposit 5 to 10% in no lien account. If, application is approved then, this amount will be included in total OTS amount. And if not approved, this amount will kept in no lien account and can be adjusted in future towards next application.
c) In most of the cases, borrower is asked to pay 25% on the approval of application or within 30 days on approval. Balance amount need to pay within stipulated time approved in application.
d) Borrower can get 90 days to 180 days for payment.
e) Amount to be approve is totally at discretion of bank management & depends upon on the following factors : like value of security/assets, age of account and sources of fund of borrower.
Conditions for OTS Finance :
a) Once the OTS is approved, client can repay through their own personal sources or can opt out for finance from the open market.
b) OTS can be finance fully or partially depending upon the requirement of borrower and as per lenders policy.
c) A running business or any kind of fixed & documented source of income is ideal for financing.
d) Most lenders require minimum 2x of collateral.
e) Finance can be available in PAN India.
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