When a loan becomes an NPA (Non-Performing Asset), getting fresh funding from traditional banks becomes extremely difficult. As per RBI guidelines, no bank can fund an NPA account.
However, NBFCs (Non-Banking Financial Companies) are an advantage for NPA cases, offering alternative funding solutions. Because, despite guidelines, these companies have the freedom to choose their clients. So, they can fund an NPA account borrower.
In this blog, we will understand how these NBFC companies work and provide funding for the distressed loans.
First, let’s understand a few terms:
What is an NBFC?
NBFC stands for Non-Banking Finance Company means it is an RBI-licensed financial institution that can only lend money but does not take deposits or operate saving & current account facility like traditional banks.
What is an NPA Account?
In banking, a loan account or an advance where a borrower fails to pay the EMI/interest for 90 days or more is known as an NPA Account.
How do NBFCs provide funding for NPA Accounts?
NBFCs offer various financial products or services helpful for resolving issues related to NPA accounts, such as:
- Provide loans to close the entire NPA account outstanding
- Offer funds to service the One-Time Settlement
- Working capital support
- Financing for stress accounts
- Loans for low CIBIL Score
- Loan against property through private credit
Click Here to Get Funds from NBFC
How do they work?
They offer funds based on the collateral & repaying capacity or payback option offered by the borrower.
Generally, they provide a 50 to 60% valuation of the property. Repayment calculated based on monthly income. They also accept the repayment through the sale of assets.
In the case of One-Time Settlement finance, they required a bank OTS letter within the stipulated time, as their process takes around one-month of time.
Similarly, they offer funds for low CIBIL cases, where general banking finance is not available.
Some of the key features of NBFC finance for stressed or NPA accounts:
- Loan starts from Rs. 50 Lakhs to 500 Crores
- Funding available in PAN India
- Loan with low credit scores
- Fast approval & direct disbursal to the previous bank
- Easy repayment options
- Working capital facility for business
- Moratorium is also offered
Conclusion
An NBFC company plays a crucial role in the revival of stressed & NPA accounts by offering loans to cater to multiple requirements, from financing an NPA to working capital support in stressed casesthat may not qualify for traditional bank loans.