Npa query
gaurav aggarwal
(Querist) 15 October 2014
This query is : Resolved
Dear Sir,
I want to inquire as to what proceedings could be undertaken by Private Banks in case the whole amount of loan of Rs. 2500000/- is covered under CGTMSE (Credit Gurantee Trust for Medium and Small Enterprises). The borrower is in the auto industry and since the industry is in recession globally. So the NPA is not voluntary but market driven.
what the bank can do to recover the amount
the party has no money to return as he has not enough money to eat
thanks
waiting for early reply
malipeddi jaggarao
(Expert) 16 October 2014
Mr.Gaurav -
CGTSME is a scheme covered by credit guarantee trust to the financial institutions to liberally extend credit facilities to SME sector without insisting third party guarantee and collateral security.
If your loan is covered under CGTSME, the may lodge its claim with the Trust. The Trust may even settle the claim (up to some percentage with a cap).
But it does not mean that Bank will leave you or file recovery suit for balance amount only. It will take action for recovery of entire amount and it could recover, it has to send back the claim amount to the Trust. Hence you are no way concerned with the scheme as far as repayment is concerned.
Nobody can predict what action the private bank will take. However if you have no tangible net worth or any properties, only the way for the bank is file a recovery suit in DRT. When there are no assets, though it gets decree, it will not be in a position to realize the dues by executing the decree as there are no attachable assets. The other alternative to the bank is to pray for civil arrest. Normally banks do avoid this step, as they are supposed to meet the expenses for such confinement.
If you really does not have any assets, the best way is to forget the episode. Nothing will happen ultimately.
K.K.Ganguly
(Expert) 16 October 2014
1. You have taken the loan which shall have to repay with interest at agreed rate,
2. You have suffered loss for whatsoever reason which can not be passed on to the Bank which hold public money. Had there been profit, you would not have passed it on to the Bank,
3. Market driven NPA does not get special treatment in the eyes of law,
4. The above arguments are generally forwarded by lending Banks.They can very well try to recover their outstanding by filing Original Application O.A.) before the DRT u/s 19 of Recovery of debts Due to Banks & Financial Institution Act, 1993 based on which the DRT may recover the outstanding by attaching the moveable and immoveable properties of the Borrower/Guarantors (considering that there has been no mortgaged property since the loan was under CGTSME scheme).
Rajendra K Goyal
(Expert) 16 October 2014
Bank can proceed against you as defaulter of repayment. Bank would proceed for recovery of full amount as any recovery received has to be returned to CGTSME to the tune of %age it received the claim. CGTSME is of no use to you personally at default stage, it would compensate Bank if its amount goes to bad debts.
J K Agrawal
(Expert) 16 October 2014
Thanks to Mr Jaggarao.
gaurav aggarwal
(Querist) 16 October 2014
i am very thankful to all for your support and advice
malipeddi jaggarao
(Expert) 17 October 2014
I am honoured Shri Agrawalji! You are welcome Mr.Gaurav Aggarwalji!!
T. Kalaiselvan, Advocate
(Expert) 19 October 2014
Expert Mr. Jagga Rao has again rendered a valuable opinion to the query, as usual his experience excels here, thanks sir for the proper information, but kindly make sure that it does not misguides the author.
malipeddi jaggarao
(Expert) 20 October 2014
Thank you Mr.Kalaiselvanji! If I am at wrong, there are experts like you to correct me always. I take such suggestions positively. Unless I am confident, I will not stress the correctness of my opinion.
