Settlement procedure adopted by the bank for NPA account

It is the prerogative of the bank to accept the OTS. There is no hard and fast rules pertaining to OTS of NPA accounts. If the bank is agreeable for OTC, then the dues may be settled for such amount within specified period.  There is no rule to waive interest after it is classified as NPA.  Buty bank can waive interest or even principal, if the secured assets are of lesser value than the due amount. Hence at the discretion of the bank any NPA account can be settled amicably under OTS.  

In the internal understanding of bank autharities the principle +interest together 75% may be vwaived where it is not possible to recover ,50% for hardly recover, 25% for difficult,0%where security is there and the borrower is honest and with fame in society. SECONDLY

Most of the Bank officers are ignorant of laws and also arrogant against the borrowers.  After the enactment of the draconian SARFAESI Act, bank officials are thinking and acting, as if they are more than Courts and judges.  That is why they dictate any terms with the borrowers and customers.  In this context, the legal fraternity has greater role to play,to make them customer-friendly.

 

Most of the Bank officers are ignorant of laws and also arrogant against the borrowers.  After the enactment of the draconian SARFAESI Act, bank officials are thinking and acting, as if they are more than Courts and judges.  That is why they dictate any terms with the borrowers and customers.  In this context, the legal fraternity has greater role to play,to make them customer-friendly.

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I have taken loan from Tamilnadu industrial investment corporation.My a/c become NPA during 1997. Now, they are taking action against my collatral under SARFASI.They charged interest more than 49%.Whether I get any relief under Exhorbinant interest Act 2003 of Tamilnadu.

S.Mani

Dear mr Kumar

OTS is simply a matter of negotiation between borrlower and the bankbut it is certainly not dependent on the whims of any particular officer.Every bank has settled norms for it.These are generally available on the web site of the bank or may be obtained by making an application to Public Information officer of the bank.Now coming to your querries

a- how many months interest a bank may waive depend on its internal policy.

b- banks are supposed to dispose off OTS application at earlist in their own interest.

c- Normally the interest charged after declaration of account NPA is waived depending upon the value of enforceable security available

loan granted by sidc is public money and the state law regarding public money lending do not apply

a. Legally. how many months interest should be bank waive as a settlement case? 

 

Ans. There is no compulsion for the Bank to waive interest.  The Bank does waive interest in certain cases where it finds the resolution is difficult through legal methods.  Instead of dragging the case for years it will come to understanding with borrower lend some motivation by offering waiver of interest.  Secondly if the borrower is genuine and poor, and not in a position to repay the dues, then also bank can waive interest.  It all depends on your terms with Bank authorities.  There isn't any policy, law to compel any bank to waive interest.

 

b. Can the bank drag the matter and continue to levy interest once the account is NPA ?

 

Ans.  Once the account becomes NPA, the interest application in the account will be stopped and a shadow balance register will be opened which shows the calculation and application of interest, costs, charges etc.  This does not mean interest should not be levied (applied) after account becomes NPA.  The interest is not applied so that income is not recognized by bank, as part of Income Recognition norms prescribed by RBI.  When the DRT issues a Recovery Certificate the bank shows the balance in Shadow balance register as the balance as on some date and also says "plus" future, interest, charges, expenses.  Accordingly the DRT issues Recovery Certificate under RDBFI, Act.

 

c. Are there norms for the borrower to demand for a certain waiver when they are settling in a proactive way?

 

No.  Borrower cannot demand any waiver, whether it is of principal or interest or charges as a matter of right, unless the Bank commits any mistake in its calculation, in such case the borrower can under RDBFI Act, move an application for set off under Section 19.

Respected Sir, I am 28 years old We have term loan of 58L on name of our company under CGTMSE scheme. For 8 years but after death of my father death me and my mother are partners in company. But now after all tries we are unable to oay the bank installments and it may turn NPA in a month. We have Factory land mortgage which is has 20L value. Now i want to kno what action can bank take against me if i dnt reoay the loan which is under cgtmse scheme. And need your further guidance for same. Borrower.