State Bank of India OTS Scheme - Important news for Clients of Juneja Legal

March 28, 2012

IMPORTANT NEWS FOR THE CLIENTS OF JUNEJA LEGAL, WHO ARE BORROWERS OF STATE BANK OF INDIA.

State Bank of India has launched a non-discretionary and non-discriminatory scheme of one-time settlement (OTS) scheme to give relief to micro, small and medium enterprises (MSME) borrowers. The bank is also offering incentives to borrowers. It will give 15 per cent and 10 per cent discount on the OTS amount to those borrowers who make full payment within one month and three months, respectively, from the date of approval of the OTS. 

A borrower has to pay 5 per cent at the time of the application and then 25 per cent (including the 5 per cent already deposited at the time of application) of the compromise amount upfront on sanction of the OTS by the bank. The balance amount of the compromise has to be paid within six months of the date of sanction without interest or 12 months with interest. The upfront payment on the sanctioned amount within one month will make the borrower eligible for the 15 percent Discount on the sanctioned OTS Amount.

Clients are requested to take the benefit of the scheme and relieve their burden of Debts. SBI is going to accept applications till 31.07.2012 only.. 

 

THE SCHEME IS AS UNDER

SBI SCHEME FOR ONE TIME SETTLEMENT OF NPAs  of MSME  (SBI OTS - MSME, 2012) .

 

1. Salient Features :

i. This will be  a non-discretionary and non-discriminatory scheme.

 

ii. Last date of receipt of application :    31.07.2012

 

iii. Last date for Conveying sanction :     30.09.2012

 

iv. The scheme  will be  applicable to doubtful or loss assets in MSME Sector as defined in the MSMED Act, 2006.

 

v. While arriving at OTS amount, the value of tangible security will be the basic  criteria, except in loss assets.

 

2. Coverage :

i. It will cover all NPAs  classified as  “doubtful” and “loss’’ in respect of Micro, Small and Medium Enterprises as defined in the MSMED Act, 2006.

ii. Cases pending before Courts / DRTs / BIFR will be eligible, subject to consent decree being obtained from the Courts / DRTs / BIFR.

iii. Cases where Bank has issued notice u/s 13(2)  or taken action u/s  13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI-2002) will be eligible.

iv. Eligible accounts referred for Revenue Recovery action under State Recovery Laws will be eligible, subject to requisite charges, if any payable, being recovered separately and remitted to the State Authorities.

v. Accounts under Consortium or Multiple Banking arrangements will also be eligible to be covered under the proposed Scheme subject to approval by 75% of the lenders by amount.

vi. Decreed cases will also be eligible subject to the consent by the DRT/Court.

 

2.1. Cases not eligible to be covered under the scheme.

i. Cases of fraud, malfeasance and wilful defaults (except where specifically permitted by the Bank  ) will not be eligible.

iii. The accounts which were classified as ‘Not Readily Realisable Account’ (NRR Account) at the time of amalgamation of various banks in SBI (e.g. Kashi Nath Seth Bank, Bank of Cochin etc.) will not be covered under this  scheme as the powers to sanction compromises in such cases are vested with ECCB.

iv. Central Govt. /State Govt. guaranteed accounts will not be considered under this scheme as they are covered by a separate scheme approved by the Central Board.

 

3. Settlement Formula – OTS Amount:

While arriving at OTS amount, the value of security available should be the basic criteria, except in ‘Loss’ assets. Accordingly, the OTS amount in respect of NPAs (Doubtful and Loss) would be calculated as under:

Sl.No

Particulars

I.      OTS for NPAs in Doubtful  category

A

Distress Sale Value

75% of the Market Realisable Value (MRV) of all available securities (Immovable/ movable) to be treated as “Distress Sale Value”.

(Two independent valuations are to be done and 75% of higher valuation should be taken) @

B

Reference Recoverable Amount

i)

Outstanding Balance as on the date of NPA (i.e. Principal Outstanding + Interest + Cost & Charges, if any)  

ii)

Add :  Simple interest at documented rate or Prime Lending Rate (PLR-2%) / Base rate, whichever is lower, on reducing balance,  from the  date of NPA till the date of crystallization of OTS (i.e. up to the last date of preceding month when the OTS proposal is submitted)

iii)

Add : Debits raised in the account on behalf of the borrower for holding on operations / additional finance on account of restructuring, devolvement LC/BG etc.

iv)

Less : Cash recovery i.e. cash recovery and amount of appropriation of liquid securities, after the date of NPA till the date of crystallization of OTS (i.e. up to the last date of preceding month when the OTS proposal is submitted).

v)

Reference Recoverable  Amount  =     {(i)+(ii)+(iii)-(iv)}

C

OTS amount would be higher of the two amounts as worked out at A and B.

 

II.     OTS for NPAs in Loss category

A

Reference Recoverable Amount

i)

Outstanding Balance as on the date of NPA (i.e. Principal Outstanding + Interest + Cost & Charges, if any)  

   ii)

Add : Debits raised in the account on behalf of the borrower for holding on operations / additional finance on account of restructuring, devolvement LC/BG etc.

   iii)

Less : Cash recovery i.e. cash recovery and amount of appropriation of liquid securities, after the date of NPA till the date of crystallization of OTS (i.e. up to the last date of preceding month when the OTS proposal is submitted).

iv)

Reference Recoverable  Amount  =     {(i) + (ii)-(iii)}

 

@ Valuation of properties

For accounts with  outstandings upto Rs.1 cr, valuations as recorded in the Bank’s books, will be taken into account for arriving at OTS amount . However, if the borrower has any objection, two independent valuations by the Bank’s empanelled valuer will be done, the cost of which will be borne by the borrower. In all other cases , two independent valuations will be a must. However, in case a valuation has been carried out within six months  prior to the OTS proposal, only one fresh valuation will be required. The cost of the valuations will be borne by the borrower.

 

4. Incentive for Early Payments

To incentivise faster payments, incentive of 15% and 10% discount on OTS amount arrived at as per the settlement formula given above, would be allowed to those borrowers who make full payment within one month  and three  months respectively from the date of approval of the  OTS.

5. Payment  Terms :

i. The borrower has to deposit 5% of the amount outstanding as on the date of NPA at the time of submission of the application to indicate his willingness for  OTS, failing which the application will not be processed. In the event the application for OTS is rejected by the Bank, such payment, which shall be held in a separate account, will be refunded without interest within three months.

ii. The borrower has to  deposit 25% of the OTS amount upfront  on receipt of sanction letter. This will include the amount deposited along with the application for OTS.

iii. The balance 75% of the OTS amount is to be paid,without interest, within six months from the date of sanction of OTS.

iv. However, the balance amount can also be paid within 12 months from the  date of sanction of OTS (the validity period) together with interest @ the documented rate/(PLR-2%)/Base rate, whichever is lower, failing which the OTS sanction will be rendered infructuous.