When legal notices are served to defaulting borrowers and recovery proceedings are initiated, complications often arise as defaulters secure various stay orders from different courts. This leads to prolonged legal battles, impeding the timely recovery of interest and principal dues. To address this challenge and enhance recovery from chronic defaulters, the mechanism of OTS was devised, aiming to reduce Non-Performing Assets (NPAs).

Banks are increasingly favoring OTS over the enforcement of security interest or legal recovery due to the sluggish legal processes involved. Finsaga Pvt Ltd specializes in facilitating OTS, providing expertise to expedite settlements and minimize NPAs.

Our OTS scheme focuses on settling accounts with MSME NPA borrowers, where the bank's exposure does not exceed Rs. 25 lakhs per borrower. The primary goal is to ensure swift settlement without protracted recovery processes.

Payment Terms: Settlement amounts are typically paid in a lump sum. If a lump sum payment is not feasible, a minimum of 25% of the settlement amount is payable upfront, with the remaining 75% due within three months from the date of accepting the OTS proposal. Interest is applicable at IVRR (simple) from the settlement date until the final payment.

The Reserve Bank of India (RBI) supports OTS for chronic NPAs up to Rs. 10 crores.

NPA Management of Banks

Post the SARFAESI Act, 2002, the RBI issued guidelines for OTS schemes, covering NPAs across sectors with outstanding balances up to Rs. 10 crores. These guidelines extend to NPAs classified as sub-standard as of March 31, 2000, cases under SARFAESI Act, 2002, and those pending before Courts/DRTs/BIFR.

Institutions adhere to standardized OTS policies with a no pick-and-choose approach, emphasizing transparency, eligibility criteria (excluding willful defaulters), delegation of decision-making authority, maximizing returns, minimizing costs, realizing the value of possessed security, making commercial decisions, and exploring available options for banks and lenders.

The RBI encourages the use of Lok Adalats by commercial banks and FIs to expedite the resolution of cases involving Rs. 10 lakhs and above, reducing the stock of NPAs.