The moment a notice u/s 13(2) of the SRFAESI Act is
received many borrowers act stupidly. Some become sullen.
Some enter into fight with the bank officers. Some rush to
High Court, while others go to the Debts Recovery Tribuanl (DRT).
Some others simply adopt Ostrich policy hoping it is a bad dream
and will go away when they wake up!
Instead the borrower must approach the Bank for help.
When an account becomes NPA initiation of proceedings
under SRFAESI Act is now a days mandatory.
No matter how close the bank manager is with you,
or how so ever sympathetic, he is help less.
The bank manager cannot be faulted for issuing
the notice or taking any of the follow up procedures.
He gets instructions from his seniors who in turn base
their analysis on cold statistics generated by the computers.
As such entering into a fight with the bank manger or his staff is of no use.
Some instances are poignant.
In one case a small time poultry farmer had to cull all
his chicken due to orders of the District Collector.
In another case a blood processing unit had to destroy
its entire stock of processed blood due to orders of health authorities.
Immediate consequence of these events was that these accounts
become defaulting which were otherwise perfectly healthy.
In both the case the bank authorities quickly moved in to secure
their assets even though they knew that the borrower was not
responsible for the situation.
Therefore actions of the bank officers should not
be linked as a personal vendetta by them.
Receipt of a notice u/s 13(2) of the SRAFESI Act
is not the end of the world itself.
You must approach the Banker and discuss the matter with him.
If you have faith you unit you must try to negotiate
restructuring of the debt.
The banker will give you some options for it.
Some of them could be like changing the dates of installments.
Giving a short holiday from repayment.
Reducing the installment amount.
For this you will need to prepare a proper report
with full documentation as to how restructuring
will help you repay the due amounts as well as
revive the unit. You should not expect the Bank
manager to prepare this report for you.
can take the help of experts who will evaluate your assets,
calculate the Return on Investments,
prepare Cash Flow Cycle and other relevant inputs.
Such a report will help the bank manger understand
that there is indeed scope for reviving your unit,
and if necessary he can take orders of his higher ups.
The second option is to go in for infusion of fresh capital.
For this another set of options are available.
It could be the differential value on your collaterals.
It could be like brining in a short term financial partner.
You could also consider some sort of M&A with another related unit.
You could consider some private investors as well.
A number of consulting experts and firms are available
who assist borrowers in this delicate task of bringing in
and selecting a investor.
If nothing succeeds, you must consider
going in for a One Time Settlement Scheme.
Not much should be expected from this Scheme,
but the bankers do have some powers to waive
of some portion of the interest component and
permit payment by installments.
This will substantially alleviate repayment
pains as compared to payment against a decree from Court/ DRT.
The sum and substance is that the borrower
must seek professional and expert advise to tide
over cash crunch cycles and not enter into a fight
his bankers.
This way the existence of the industry can be ensured.
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