The full form of OTS is One-Time Settlement

The One Time Settlement Policy of the Bank covers all sectors including MSME. The OTS policy in line with SIDBI Scheme for OTS settlement of MSMEs has since been approved by the Bank for implementation. While general provisioning under the SIDBI Policy and our OTS Policy are in Conformity with each other, a few variations in the method of computing OTS acceptable amount in tune with SIDBI guidelines is now implemented as detailed below:

• Our existing OTS policy is based on the Net Present Value of the available security factored at 12% ,reckoning 4 years as the realisation period of the security which works out to 62% of the value of the property.
• OTS policy of SIDBI is based on the Distress Sale Value (DSV)of the security (assessed by two independent valuers). The DSV is reckoned at 75 % of the realizable market value as per SIDBI guidelines.

Prompt recovery of loans and advances not only increases liquidity and profitability but also keeps funds cycle moving by continuous lending for the development of the economy. Compromise Policy is a step in this direction. The compromise should be a negotiated settlement under which it should be ensured to recover its dues to the maximum extent possible with a minimum sacrifice. The important aspect in connection with settlement proposals is the concept of opportunity cost of funds. The opportunity cost of funds in hand vis-à-vis that of funds, which could come in hand at a later period should be calculated to establish a comparative advantage of ‘now or later’. The guiding factors for a compromise settlement are:

• Balance outstanding in the account (real account) as on date of NPA.
• Provision held in the account.
• Market value of the securities and time taken for realizing it.
• Reasons for failure i.e. factors beyond borrower’s control like natural calamities.
• Present status of the account and the amount that can be recoverable.