Are you eligible for one-time settlement?

BANGALORE, INDIA: India's largest lender, the State Bank of India, has been providing one-time settlement (OTS) options for the borrowers who are unable to pay their dues in time in case their business failed. A number of enterprises and SMBs make use of this provision which helps them to settle the dues with the bank.

In an interaction with CIOL, KS Somayaji, deputy general manager, Stressed Assets Management Branch, SBI, gives an insight into the OTS plans and the benefits of the same.

What is meant by OTS?

OTS is a one-time settlement option offered to the borrowers who are unable to repay their loans because of a loss in their business or damages etc. There is no a specific set of rules for OTS and it varies from person to person and business to business. 

The OTS application goes through some committees and no individual officer has got discretion to take a decision. There is a set of procedures to be followed. It is not just to assess the property value or the collateral given to the bank, but is the total ability of a person to pay. If the borrower has 100 per cent security, the bank may not consider the OTS.

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But if it is found that it is a case of clear diversion of funds or willful default, then the bank will be forced to take action. In such cases, an investigation will be conducted to know where the fund is gone or if he has siphoned off the funds etc.

If the case is in a law of court, what are the options does the bank have to recover the money?

If the case is in a law of court, the bank will wait until the court delivers a decree. If it is in favour of the bank, we will take steps to attach the property with the help of the court and then will try to sell the property.

The bank can get the defaulter arrested, but that's the last resort. If he has still some means to repay the amount, we will extend our helping hand. The bank will take th extreme step only if it is found that the borrower willfully defaulted the payment.

What are the procedures for OTS?

First of all, we try to resolve it by means of Debt Restructuring Mechanism. The bank extends the date of payment and reduces the interest rates etc. Three things are required for restructuring. First, the enterprise or the company should be still running. Secondly, it should be technically feasible and economically viable to make the payment. Third, the borrower should be co-operative. If all these three things are met, we will try and restructure the payment when the asset becomes an NPA (non-performing asset).

The restructuring option is not applicable to those businesses which are already closed. Then we will try to recover it straight away, by filing a suit in compliance with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002. As per the act, the bank can take the physical position of the properties and sell it in accordance with certain procedures.

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Apart from that, we will also put pressure on the borrower to pay the dues. If he is not co-operative, he should not be entertained in other banks too. The defaulter goes to the CIBIL (Credit Information Bureau India Limited) list. If it is found that the borrower has siphoned off or diverted the funds, then his name will go to RBI's willful defaulters list. Those who featured in the list may not get financed by any other financial institutions in the country.