Treatment of npa where a loan is covered under cgtsme-reg.

This query is : Resolved 
 


Querist : Anonymous (Querist)
27 November 2020

Dear Sir,
Greetings. Mine is a Proprietary Company. I have availed a Term Loan of Rs. 20L & a CC of Rs. 20 L from a nationalised bank in the month of August 2018 & the entire loan is covered under CGTSME which is still in force & the premium is being paid by us for the same.
I have been running a restaurant. My business is now shut since beginning of Covid -19 from April 2020 .

Prior to this, I had taken 2 similar loans , for a period of 5 years, which were prepaid much before time

I had been servicing this loan till February 2019 not allowing it to slip to NPA. Even now the loan is still not declared as NPA since the bank has given me a moratorium of 6 months from October 20th, 2020 onwards. I am unable to continue the business since the same is not viable any more.
Under the circumstance, the bank may have to declare me an NPA . When the loan is covered under CGTSME,
1) Can the bank recover the same from me even though there has been a genuine business loss?
2) Can the bank lay claim on any assets possessed by me but not procured from these funds availed from it?

Please note that there is no collateral given by me to the bank for the abovementioned loan.


Warm regards,




Rajendra K Goyal Online (Expert)
27 November 2020

CGTSME Scheme is a guard to the Banker, so that it freely disburses loan to this sector.
Banker can recover from CGTSME upto the decided % (say 75 or 80% or as prescribed in the scheme) of the unpaid loan from borrower.
Bank can recover full outstanding from Borrower and any recovery has to be shared with CGTSME upto the % to which claim was received.
If the borrower has nothing to repay, portion of loss is thus covered by CGTSME to the mentioned % only and not fully.

Rajendra K Goyal Online (Expert)
27 November 2020

You said:
1) Can the bank recover the same from me even though there has been a genuine business loss?

Reply:

Yes, primarily you are responsible for the repayment.

You said:
2) Can the bank lay claim on any assets possessed by me but not procured from these funds availed from it?

Reply:

If any asset is mortgaged, Bank would try to recover from that asset. If court award a decree against you, Bank can recover its loan from the asset which is not mortgaged with the Bank or not procured from the proceeds.


Querist : Anonymous (Querist)
27 November 2020

What is the way forward to come out of the problem, moreso since I do not have any source of income & am a Senior citizen?

Rajendra K Goyal Online (Expert)
28 November 2020

If the Bank is of the opinion that nothing can be recovered from defaulting borrower, there is possibility that the Bank may not proceed with recovery proceedings. This is possibility only and all depend on Bank policy and instructions. Sometime Bank take such decision to avoid costly recovery proceedings as major portion of loss has been already reimbursed by CGTSME. Further if any recovery is done, that has to be shared with CGTSME.

Dr J C VashistaOnline (Expert)
30 November 2020

Very well analysed and explained by expert Mr. Rajendra K Goyal, I agree.

Rajendra K Goyal Online (Expert)
30 November 2020

Expert Dr. J.C. Vashishta ji, thanks for your comments.



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