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samiksha30 · 1 month ago

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Why addressing NPAs is essential for ensuring sustainability and progress

Non-performing assets (NPAs) are a major concern for businesses and financial institutions. An NPA occurs when a borrower fails to repay a loan or debt within the stipulated period, resulting in a financial asset losing its ability to generate income.

Addressing NPAs is not just about recovering outstanding debts, it is critical to ensuring the sustainability and progress of businesses.

Here’s why it’s essential to address NPAs:

Reduced Cash Flow and Increased Financial Stress:

One of the most immediate and direct effects of NPAs on businesses is a reduction in cash flow. When businesses have outstanding debts that are not being repaid, the money that would have been used for operations is tied up. This creates liquidity problems, making it difficult for the business to pay for operational expenses, salaries, raw materials, and other essential costs. With a significant portion of the company's capital locked in bad loans, businesses struggle to meet their financial obligations, which affects their ability to pay creditors, suppliers, or employees.

Higher Borrowing Costs and Strained Relationships with Lenders: Financial institutions are less likely to lend to businesses with a history of non-performing loans, Resulting in higher interest rates on loans.

Lenders may lose confidence in the business and impose stricter terms or even demand immediate repayment of outstanding loans.

Loss of Business Opportunities and Damage Reputations:

The absence of capital can throttle growth, whether developing into new markets, investing in the latest technology, or launching new products. Additionally, businesses may struggle to secure strategic partnerships or investors, as they are perceived as financially unstable. Negative publicity related to NPAs or legal proceedings can harm the company's brand image, making it harder to draw or retain new clients.

Risk of Insolvency and Increased Regulatory Scrutiny:

In the worst-case scenario, businesses with significant NPAs may face insolvency or bankruptcy. If the business cannot recover from the financial strain caused by non-performing loans, it may be forced to liquidate assets, restructure, or even close down. This could lead to loss of jobs, legal issues, and financial instability for stakeholders.

Financial institutions and businesses with high NPAs may face increased scrutiny from regulators. In some cases, regulators may impose penalties, fines, or other sanctions on businesses that fail to manage their debts effectively.

How NPA Consultants Pvt Ltd will help you in Effective NPA Management?

Key Services and Strategies

Guidance to handle the pre / post NPA pressure of banks, recovery agents.

Do not make any commitments on assumption and in absence of any clear roadmap.

Do not increase your debt trap.

Do not rely on verbal assurances.

Do not neglect any notices issued. reply suitably.

Avail timely professional aid to handle it.

Borrow time legally.

Seek timely professional aid for replying to the notices issued, initiate legal proceeding for any illegal action, save mortgaged assets, and for any other banking, legal or financial issues.

NPA account funding.

If there is a good business proposition backed by security, funding for NPA accounts can be arranged through various channels.

Get waiver in interest / principal amount under One Time Settlement (OTS) and how much?

The banker shall assess the realisable value of the security charged/ other attachable assets and net worth of the borrower/ promoters/guarantors. present status of the borrower unit/ company and its financial performance while working out the OTS. we make you eligible for getting the best settlement terms.

Wilful default classification and its consequences?

When there is a default in repayment obligations by the unit (company/individual) to the lender even when it has the capacity to honour the said obligations. There is deliberate intention of not repaying the loan, amounts to wilful default. The funds have been diverted or have been siphoned off and not been utilised for the purpose for which it was availed. When the asset bought by the lenders’ funds have been sold off without the knowledge of the bank/lender. In such cases Lenders can classify as WILFUL DEFAULT

Major Consequences:

- No additional facilities should be granted by any bank / FI to the wilful defaulters. In addition, the promoters of companies where banks/FIs have identified siphoning / diversion of funds, misrepresentation, falsification of accounts and fraudulent transactions would be debarred from institutional finance and floating new ventures for a period of five years from the date the name of the wilful defaulter is published in the list of wilful defaulters by the RBI.

- Publication of photographs of wilful defaulters (on a case-to-case basis) in newspapers.

- Criminal proceedings against wilful defaulters,

- Under section 29A of the Insolvency and Bankruptcy Code, 2016, a wilful defaulter cannot be a resolution applicant.

1. Debt Advisory

Customized Solutions: Assessing debt structures and providing tailored advice to optimize repayment terms and reduce financial burdens.

Strategic Negotiations: Facilitating discussions with lenders to secure favourable terms, including One Time Settlements (OTS).

2. Corporate Restructuring

Streamlining Operations: Reorganizing business structures to enhance efficiency and financial stability.

Optimized Capital Allocation: Realigning resources to address critical areas and improve cash flow.

3. Mergers & Acquisitions

Strategic Partnerships: Identifying and facilitating mergers or acquisitions to infuse capital and expand market reach.

Value Creation: Leveraging synergies to enhance operational performance and reduce financial strain.

4. Private Equity

Growth Capital: Securing private equity investments to strengthen financial standing and fund expansion plans.

Value-Added Support: Collaborating with investors who bring expertise and resources to scale operations effectively.

5. Revival of Sick Industries

Turnaround Strategies: Developing and implementing plans to revitalize struggling industries and restore profitability.

Stakeholder Collaboration: Engaging with lenders, vendors, and employees to align efforts for recovery.

6. Managing Corporate Litigations

Legal Expertise: Addressing disputes and mitigating risks arising from financial distress through effective legal representation.

Proactive Resolution: Ensuring swift and amicable resolutions to minimize disruptions and safeguard reputation.

Why Choose NPA Consultants Pvt Ltd?

NPA Consultants specializes in NPA management and related matters under the IBC, including CIRP, resolution plans, liquidation, and corporate restructuring. With a network of 40 resolution professionals and 25 legal firms, we provide expert guidance to borrowers and resolution professionals. We also advise nationalized and cooperative banks on NPA matters.

Our services for MSMEs include pre- and post-NPA guidance, borrower rights education, and alternate financing solutions for viable businesses. We facilitate amicable settlements with banks and provide one-stop solutions for banking, legal, and financial matters.

Our team comprises seasoned experts, including former senior officials from RBI, IDBI, ICICI, and other leading banks. Under the leadership of Dr. Visswas, we deliver innovative solutions even in critical cases, supported by a dynamic team of advocates and financial professionals.

NPA Consultants also offers ancillary services like valuations, risk management, and feasibility assessments. Since the introduction of IBC in 2016, we have facilitated resolutions and liquidations, including a USD 100 MN case.

With over 20 years of experience, we have advised 2000+ SMEs, handled cases ranging from USD 1 MN to USD 100 MN, and established synergies with banks and financial institutions. Our expertise ensures win-win outcomes for borrowers and lenders, making us a trusted partner in the field.

For more information or to request a consultation, visit NPA Consultants website: https://www.npaconsultant.in/

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Contact: NPA Consultants Pvt Ltd +91 89282 89070 https://www.npaconsultant.in/

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