Case Study: How We Successfully Regularized a Client's NPA Account

This is about one of our clients located in Chennai, struggling with the stressed loans.

Client Background

The client was a mid-sized manufacturing company that had been operating successfully for several years, supplying electrical instruments to the government & private. However, due to COVID-19, delayed receivables, and cash flow constraints, the company began experiencing financial crunch & difficulties in paying loan EMIs.

As a result:

• Loan instalments remained overdue for an extended period.
• Out of five loan accounts, two were classified as a Non-Performing Asset (NPA).
• So, as per RBI guidelines, all accounts declared as NPA
• Company deprived of Working capital.
• Business operations were adversely affected.
• The bank started legal action towards loan recovery & issued a 13(4) notice of symbolic possession.

Their management approached us seeking funds to close their NPA & working capital.

Our Approach

We thoroughly reviewed their balance sheet, underlying securities, other sources of repayment, and the possibility of restructuring to make them standard again. However, existing collateral is not enough to provide additional funds for working capital.

As all the securities were mortgaged in the bank, the client offered fresh collateral for raising additional funds.

With the knowledge of NPA Finance, we offer the following plan to our client.

Click Here to Get a Loan For NPA Accounts

Our Revival Plan for Regularising the NPA accounts

• Transfer of NPA Accounts to a new lender
• Direct payment for closure of distressed loans.
• All securities, including fresh collateral offered to the new lender
• Infusion of additional funding towards the working capital requirement

The Process

We collected all the necessary documents from the client & officially logged in the case. The documents include:

1. Three years’ ITR with balance sheet
2. Last one year’s bank statement
3. Company KYC
4. Directors KYC
5. Sanction Letter
6. Copy of bank notice
7. Valuation report (available for only two properties)

Once the documents have been submitted, the new lender calls for a meeting at their office. So, along with the client, we also visited the lender’s office, and after 1.5 hours of discussion, the meeting ended. In the meeting, they tried to understand the reasons for the financial crunch and NPA. Also, discussed about the collaterals, business profitability, and repayment terms of the new loan. They also raised a fresh query about documents.

The client submitted all the requested documents within a couple of days. After this, the lender’s approval team recalls the client through voice calls and, after clarifying their specific queries, they issue an approval letter to the borrower with the terms & conditions.

Upon accepting the approval letter, the lenders visited their place for ground verifications, and their legal team conducted a legal & valuation of all the collateral. They also start the documentation towards the disbursement. During the process, they also met their previous bankers and discussed about the release of collateral.

Final Outcome

• After the satisfactory due diligence, the new lender releases the first tranche of disbursement to the previous banker to close NPA accounts and transfer collateral securities.
• Once, lender received the property documents of all properties, they released the second tranche to the borrower for the working capital.

Benefits to Client

• Closure of all distressed loans
• Removal of NPA tag
• A new repayment tenor is provided with the three months moratorium
• Withdrawal of legal cases by bank
• Immediate relief from mental & financial pressure
• Availability of working capital to re-track the business
• Revival of credit score
• Opens possibility of availing banking products in the future
• All stressed loan accounts have been regularized again

Conclusion

With the right strategy, an understanding of the available options, and the selection of a good advisor, borrowers can regularize their NPA accounts and regain financial stability. This helps in their credit revival, which opens the opportunity to re-access the standard banking facilities.