During the prevailing financial situation, small businesses and MSMEs in India are encountering more difficulties in sustaining their economic position. Accounts which default on loan payment because of cash flow problems usually end up in Non-Performing Asset (NPA) category. But it is not all lost! A commonly used and effective recovery means is the One-Time Settlement (OTS) process, introduced by the banks which, when managed tactically, becomes a potential way of reviving businesses and preventing time-wasting court contests. This blog will describe One-time settlement in bank and how this can be helpful to small businesses.
What is the One-Time Settlement (OTS) Process?
One-Time Settlement (OTS) is an organized repayment plan between a lending institution and the borrower where the latter makes partial settlement in a one-off amount or an instalment that he can agree on, and the bank treats the account closed when it gets the money of so much agreed. It lies in the revival scheme of NPA in banks, which is there to eliminate the bad debts and provide the borrower with an opportunity to restart the financial path.
In case of the accounts that fall under the NPA category, particularly when the legal recovery is not possible or happens tardily, banks launch OTS schemes on the accounts. After the agreement, the borrower then makes payments as per the terms; the bank then waives off the balance amount, which is useful to both parties. This is the main strategy revolving around the concept of One-time settlement in terms of bad loans management by the banks.
How Does the One-Time Settlement Work?
Account settlement by NPA through OTS is a process that passes through steps:
Foreign Money at Outstanding Dues:
The bank considers the full amount of dues including the principal, interest and penalties.
Proposal Submission:
The debtor (or his agent) would put up a proposal to pay off the account under OTS, proposing the sum he or she can afford.
Negotiation and Approval:
Upon examination of the proposal, the bank can accept, decline or at least bargain over the points. It should also be endorsed by competent authorities.
Payment Schedule:
Upon the agreement, the borrower will be expected to pay the settlement amount either on a lump-sum basis or on an instalment basis as are agreed.
Closure and Credit Reporting:
The bank will close the NPA account upon successful payment and an update on the credit bureaus will be settled or closed depending on the agreement.
Why Should MSMEs Consider OTS?
OTS gives a lifeline to many MSMEs. Business owners will be able to regain control by working out fair places with banks rather than waiting to be ordered by commencing proceedings or having to surrender their assets to the banks. These are its main advantageous points:
- Prevent long legal procedures
- Save the face of a business
- Back to creditworthiness quicker
- Stop waste of the assets further
Nevertheless, when it comes to OTS without the help of a specialist, it becomes dangerous to negotiate. The torque of banks to increase settlement is common and the borrowers do not know their rights and options. For most, understanding how One-time settlement in bank situations work requires professional intervention.
How NPA Consultants Pvt. Ltd. Can Help
This is the role played by NPA Consultants Pvt. Ltd. Our combined expertise of managing NPAs coupled with a highly experienced and qualified legacy team of industry veterans is unparalleled courtesy the company with former directors of RBI, MDs of top banks such as SBI and Central Bank of India, ex-GMs of IDBI and Bank of Baroda among others.
Our founder is Dr. Visswas, who has had working experience with leading financial institutions such as IFCI, IRBI, IDBI and ICICI. It is this huge network and knowledge that enables us to come up with winning strategies that can be respected and acceptable by the banks.
Whether you choose to plead your case before a court, lay out favorable out-of-court settlement terms, or respond to any legal notices – our team consisting of advocates, financial consultants, and legal professionals would see to it that your business deserves a second chance after all. Having an open and guiding cooperation with Dr. Visswas, we have a young, vibrant team that provides short-timed and prone-to-act in the direst of situations.
Strategic Approach to NPA Recovery Process in Banks
In NPA Consultants, we advocate the personal touch. Any business case is individual and our solutions appreciate that:
- In-depth case analysis and case viability analyses
- Guidance in preparation and filing OTS proposals
- Bargaining with banks at acceptable and considerably sustainable rates
- Alternative post-settlement finance advisory
We are not just into settlement of NPA but also assist businesses to remain in water by planning their finances long term. Our support is all-rounded, and we offer NPA management services, legal support, help in restructuring, and refinancing. We also tie our approach to the actual implementation of One-time settlement in the practice of the banks so that they can bring good outcomes.
Final Thoughts: Take Control with the Right Partner
The One-Time Settlement in banks is not only a financial means; it is a second chance. However, it is like an opportunity that should be taken through strategy and expertise. The negotiation power of the MSMEs is usually minimal when they go to the banks directly and this is where experienced consultants come in as they make all the difference.
When your business is in a situation of debt and you are planning the possibilities of settling an NPA account, do not go by yourself. Invite NPA Consultants Pvt. Ltd. to come along with you to recovery, repayment, and further development.
