Policy for One-Time Settlement (OTS) scheme for Micro & Small

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Enterprises (MSE) Sector

Particulars

Guidelines

General

In terms of RBI's Master Direction on “Lending to Micro,

Small and Medium Enterprises (MSME) Sector", the Bank

has put in place non-discretionary One-Time Settlement

(OTS) Scheme for the recovery of Non-Performing Assets

(NPAs) under MSE Sector as a part of its Board Approved

‘Recovery Policy’. The salient terms and features of the

said Policy are as below.

Units / Borrowers Covered:

This OTS Scheme shall cover all NPAs of borrowers from

MSE sector (only MSE units as per the above referred RBI

Master Circular), as at the end of previous month. Any

eligible borrower who is in default and classified as NPA

in the books of the Bank, intending to clear the

outstanding dues through compromise/settlement, can

submit the written settlement proposal to the Bank. The

competent authority of the Bank, after examining the said

proposal, shall revert on the acceptance or rejection of the

said OTS proposal within 30 working days from the

receipt of such a proposal.

Computation of Settlement

Amount

The minimum amount required for entering into a

settlement/compromise would be 100% of the total

outstanding balance/dues including interest as on the

date of approval of compromise/settlement along with

the expenses incurred by the Bank for recovery

proceedings

Interest from the date of settlement approval to the date

of final payment shall be waived, provided the borrower

adheres to the conditions as outlined in the settlement /

compromise approval.

Note - The outstanding balance means – the outstanding

balance including interest in the loan account as on date

of NPA plus unapplied interest from date of NPA

(substandard) till the date of compromise/settlement

minus any recoveries received plus expenses and charges

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in the account till date, including but not limited to

Cheque Bounce Charges, Late Payment fees,

Repossession Charges, inventory holding costs, legal &

court fees and auction charges.

Repayment Terms

The settlement amount is to be repaid entirely in one

lumpsum i.e. one tranche after the approval of OTS

proposal.

In case, lump sum payment cannot be made, then a

minimum of 25% of the settlement amount to be paid

upfront in the form of DD/RTGS/NEFT and deposited

by the borrower immediately after the approval of

settlement and the balance settlement amount along with

simple interest at 10 % p.a from the date of settlement up

to date of final payment to be paid within 60 days from

the date of communication of acceptance of settlement

proposal by the Bank.

Source of Payment

The borrower intending to enter into compromise

settlement has to provide a written statement/letter about

source of settlement amount. The statement thus

provided would be examined before official acceptance or

rejection of the compromise proposal to ascertain the

certainty and feasibility of the settlement proposal.

Non-compliance of

settlement terms/default in

payment

In case of default in payment of full dues or any

tranche/instalment as per the settlement terms and non-

compliance of other terms of settlement, the Bank

reserves the right to cancel the OTS immediately and

withdraw all relief, waiver and concessions given to the

Borrower and restore the original dues prior to sanction

of OTS proposal and shall initiate/continue with legal

actions, for continued default beyond 90 days, to recover

the dues prior to the settlement, minus amount already

paid during settlement, along with future interest thereon

till the date of receipt of all the outstanding dues.

Other General Terms

1. All eligible customers should submit a written

settlement proposal to the branch concerned.

2. The decision on the amount of one-time settlement

and consequent sanction of waiver of unapplied

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interest and / or write off shall be taken by the

competent authority as per the delegated board

approved powers.

3. Wherever borrowers have filed cases against the

bank/made counter claim in any Court or

Tribunal, settlement under the Scheme shall be

subject to withdrawal of the case/counter claim.

4. OTS proposals submitted by the parties under

MSE Sector which are not in accordance with this

Scheme will be taken up and processed as per the

Bank’s existing Recovery and OTS Policy.

5. Indian Banks’ Association (IBA) vide Lr. No.

CandI/Misc/1435 dated May 14, 2007 informed

that Reserve Bank of India advised banks that

they may enter into compromise settlement with

wilful defaulters/fraudulent borrowers without

prejudice to the criminal case against the borrower

and that such cases of compromise settlement

should be vetted by Management

Committee/Board of the respective Banks.

6. Wherever OTS amount is funded by other

Banks/Financial Institutions/NBFCs/SC/RC, the

Bank may assign the debt/ securities in their

favour. In such cases, the guidelines framed for

sale of financial assets will apply.

7. There are cases, where Guarantors in NPA

accounts come forward with settlement proposal

so that they can seek release of their

guarantees/securities or discharge them from

payment of bank dues. Such proposals from

guarantors and/or one of the Directors would be

treated on par with the proposals received from

Borrowers.

8. This OTS scheme will be valid and may be subject

to changes as per directions of the RBI in this

regard from time to time.