IDBI Bank launches OTS scheme for retail NPA borrowers to boost recovery

Outstanding principal of Rs 2,300 crore in focus

To boost its recovery from retail non-performing accounts, private sector lender IDBI Bank has launched a special scheme offering one-time settlement (OTS) provision to retail borrowers with principal outstanding in the range of Rs 10 lakh to Rs 10 crore, subject to eligibility criteria.

The scheme – Sugam Rinn Bhugtan Yojana – aims to offer relaxed terms to retail borrowers whose loans have turned non-performing assets (NPAs) as of March 31, 2021, and continue to be NPAs as of August 31, 2024. It provides a renewed opportunity to borrowers in distress who are willing to settle their dues and avoid legal entanglement.

According to an IDBI Bank executive, the gross principal outstanding of such eligible accounts is about Rs 2,300 crore, and the number of borrowers is over 4,800. The portfolio is a combination of NPAs on books and written-off accounts. This scheme is an effort on the part of the bank to resolve long-pending cases, he said.

IDBI Bank’s gross NPA ratio in Q1FY25 stood at 3.87 per cent, down 66 basis points (bps) sequentially, while its net NPAs stood at 0.23 per cent, down 11 bps sequentially.

According to the terms of the scheme, the Mumbai-based private lender is offering a waiver of interest and expenses for all eligible accounts, except for the guaranteed emergency credit line, where the total dues have to be paid.

Additionally, the bank is offering a haircut and concessions based on the availability of security coverage.

The scheme is effective from September 2, 2024, and will conclude on March 25, 2025.

As per the scheme, eligible borrowers who are looking to settle with the bank have to deposit at least 10 per cent of the settlement amount as an upfront payment on or before December 31, 2024, to confirm their participation in the scheme. The balance is to be paid within a maximum of 90 days from the date of the Letter of Approval (LOA) for payment without interest.

Alternatively, the balance amount can be paid on or before March 25, 2025, with an interest cost based on the 1-year marginal cost of funds-based lending rate (MCLR) as on August 31, 2024. Additionally, they have to pay a 2 per cent interest per annum calculated on a simple interest basis on the amount paid beyond 90 days from the date of the LOA.

However, under no circumstances can the payment under this settlement be made beyond March 25, 2025, even if the remaining days from the date of the LOA are fewer than 90 days, the bank said.

Under the scheme, borrowers ineligible for the one-time settlement scheme include accounts under vendor bill discounting or vendor finance, accounts secured by corporate guarantees, and those where the borrower has been admitted to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), among others.