The need for OTS arises due to the fact that whenever the recovery proceedings are initiated and legal notices are issued to recover dues from the defaulting borrowers, the defaulters in most of the cases obtain different kinds of stay orders from different Courts and the matter remains pending for a long time. During this period the lenders are not able to recover their interest/principal dues from such borrowers as the matter remains subjudice. In order to improve the recovery from all such cases and also from the chronic defaulters and in order to reduce the Non Performing assets (NPAs), the mechanism of OTS of dues was evolved.
There is an increase in tendency from banks to prefer one time settlement (OTS) as against enforcement of security interest or recovery through legal route. The trend is gaining momentum because of the tardy legal process involved.
The Scheme aims at One Time Settlement with the NPA borrowersto ensure speedy settlement of the accounts without going into long drawn recovery process.
The amount of settlement is payable in one lump sum. In case lump sum payment could not be made, at least 10% of the settlement amount shall be payable as upfront and the balance amount of 90%be payable within 6 to 12 months from the date of acceptance of the OTS proposal by the Bank with interest @ IRR (simple) from the date of settlement till the date of final payment.
Declared OTS Policies of Institutions (Commom Factors)- Standardization, No pick and choose poliy, transparency, eligibility (willful defaulters to be excluded), Deligation power (Decision making authority), maxizing returns & Minimizing costs, realizing value of the possessed security, commercial decision, options available to banks and the lenders
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