Catering NPA Services On PAN India Basis

Though the process of unlocking has been initiated in different phases, corporates see a bigger challenge in the coming months. The biggest problem is liquidity and solvency. And another challenge is to make a budget for the next financial year. The costs will remain the same whereas revenues will be greatly stressed. Of course, it will put stress on npa management as well.

Businesses have been attacked from three fronts- the demand fallen, the supply chain got hampered and liquidity vanished. Though some measures were taken by the government to improve liquidity by infusing the same through the banking system. The main aim was to avoid job loss and eventual financial crisis.

The true effect of liquidity transmission will be visible only when the Micro Small and Medium Enterprises (MSME’s) will get benefited. So far, only large business houses are getting the fruits of the efforts. Also, banks are giving limited credit risk in the pandemic situation. So, there is no major positive effect as such. Experts suspect a surge in npa in india.

Large corporates will have a direct impact if they will not get demand from MSME as it is the essential element of the supply chain. Hence, liquidity flow has to be there up to the MSME.
 

What is the way out?

MSME will have to rework the payment terms because their customers present less credit risk and can refinance the loans. Large corporates will have to do reverse factoring arrangements. Thus, MSME can monetize their receivables and control the situation in a better way.

It is important that a credit guarantee scheme is announced by the government. It will avoid the NPA crisis. Measures like wage subsidy can provide better liquidity reach. Most importantly, there should be efforts made to build more resilient enterprises so that they can sustain further episodes of pandemics.

So, what is the takeaway? It is preserving liquidity. Also, the government has to prioritize customers and products based on cashflow. The focus has to be moved from CAPEX to OPEX. It can be a gamechanger in boosting the economy and keeping the npa recovery process in control.

Non-performing assets or NPA has shown a drastic increase in the past few decades, and it is considered a big threat to the economic growth in India. Post Covid-19, the situation seems to be getting worse.

In view of the various npa management policies being followed by the government to keep it under control, OTS or One Time Settlement is a prime one.

In OTS, the borrower proposes to settle all the dues at one shot and the bank agrees to accept a lesser amount if the payment is made in a single transaction. When banks do the npa account settlement in this way, they have to compromise on a portion of profits.

Still, One Time Settlement is considered better than the other methods of management of Non-performing assets.

The negotiations and settlement are done by the bank under a written policy document for loan recovery. However, it should not be missed that the OTS is not for every NPA account. It is the discretion of the bank to decide whether it should be chosen or not. Obviously, it is not applicable for deliberate defaulters.
 

What is the impact of OTS?

Whenever a bank goes through the OTS path, there is a dent to the productivity. Hence, it is not an answer to the fundamental problem of NPA.

As far as the benefits of OTS are concerned, then the biggest benefit is the speedy recovery of loans and advances. It increases the liquidity of the bank and an easy flow of funds encourages banks to keep on the lending process.

When NPAs get settled through npa recovery process, the banks, financial institutes maintain good financial health. It further makes the whole economy healthy.

To reduce the npa in india, the government is encouraging One Time Settlement. Big, medium, and small units are benefitting of it. In case of the account not settling through the OTS path, banks or financial institutes are required to involve the legal process. To help this, there are several qualified nclt lawyers india who help the clients. Call an expert npa consultant in india to understand the finer points.

The problem of NPA or as acronym-ed Non performing asset is becoming a major loan settlement threat to Indian economy and it's mainly on the MSME side. When it comes to a situation relating to NPA; MSME owners get really petrified as in when compared to large corporates sector.

Here are a few possible solutions:

Speedier Loan

On September 28, 2018 our finance minister Mr. Arun Jaitley launched a new portal to fast-track the loan process. The loans can be approved within 59 minutes with an amount of 1 crore for the MSME sector. The business only needs to submit GST and income tax details without the entrepreneur have to visit the banking branch.

Interest Rates And Collateral

- Now most of the entrepreneurs have a common mindset that whenever bank grants loan to them. They have granted some favours on the MSME entrepreneurs without making
them realise the rate of interest charged on them is pretty much higher rate when compared to other corporate's. The amount of collateral's kept for providing loan is also pretty
huge.

The Pressure

With such a huge amount of loan the common MSME entrepreneur rather than focusing on the business keeps getting distracted by pressure inferred to them by the banks.
Forgetting the primitive ideology that the bank is for the business and not the other way round.

The Solution

- This problem can be solved only when the entrepreneur will focus on his business, rather than focusing on the repayment of installment for the loan. There are many legal ways to buy time to delay and Dr. Viswaas Paanse has helped many MSME owners for the same. He says, “ Focus on the business and the leave the bank problems on the experts”.

About Dr. Viswaas Paanse

- He is an Ex banker man holding a PH.D degree from United Kingdom (U.K) and many more degrees aside from that. Having 2 decades of experience in NPA. Dr. Paanse is a thorough professional when it comes into dealing with NPA and have helped in revival of many sick MSME with his experience and qualified team members.