Debt Restructuring & One-Time Settlement Support

What is debt restructuring and one-time settlement support?

When a business can't service its loans as agreed, it has options before the bank turns to SARFAESI, the DRT or the IBC. Debt restructuring changes the loan's terms — extending tenure, adjusting interest, converting some debt — so the business can recover. A one-time settlement (OTS) is a compromise where the lender accepts less than the full dues in a lump sum or short instalments to close the account.

Banks and NBFCs follow RBI frameworks and their own board-approved policies. A credible proposal, backed by numbers, makes the difference between a workable deal and enforcement.

The key terms

The vocabulary of stressed loans:

SMA and NPA

Special mention accounts show early stress; an account becomes an NPA after 90 days overdue.

Restructuring

Changing loan terms under RBI's frameworks, with conditions on viability and classification.

One-time settlement

A compromise closing the account for less than the full dues.

Compromise settlement framework

RBI's 2023 framework requiring lenders to have board-approved policies for compromises and write-offs.

SARFAESI

The law letting secured lenders take possession of and sell secured assets without going to court.

DRT

Debts Recovery Tribunals that hear lenders' recovery applications, and borrowers' appeals against SARFAESI actions.

Credit reporting

Settled accounts are reported as 'settled', which affects future borrowing.

Why it matters

Acting early preserves options:

Avoid enforcement

SARFAESI and DRT actions can mean losing assets.

Preserve the business

Restructuring can keep a viable business running.

Personal guarantees

Promoters' personal assets are often at risk.

Negotiating position

Credible numbers strengthen the proposal.

Credit record

Settlements and defaults affect future borrowing.

Tax on waivers

Waived amounts can be taxable depending on the loan's nature.

Time

Delays add interest and reduce options.

Who is this for?

We work alongside your legal counsel where enforcement proceedings have started.

Options for stressed borrowers

How the options compare:

What we'll need from you

Loan documents

Sanction letters, security documents and statements.

Notices

Any SMA, NPA, SARFAESI or recovery notices.

Financials

Recent accounts and current management accounts.

Projections

Realistic cash flow projections.

Asset details

Security and valuations.

Funding sources

How a settlement or restructuring will be funded.

Fees can include a success component tied to the settlement achieved.

How we support restructuring and OTS

Our approach:

1. 1

   Assess

   We review the loans, security, notices and your financial position.

2. 2

   Choose the path

   Restructuring, OTS or another route is chosen.

3. 3

   Build the case

   A proposal with projections, valuations and funding is prepared.

4. 4

   Negotiate

   We support discussions with the bank.

5. 5

   Document

   The sanction or settlement letter is reviewed.

6. 6

   Close

   Payments are tracked, and closure and security release confirmed.

After the deal

Finishing properly:

Pay on schedule

Missing OTS instalments can revive the full dues.

No-dues certificate

Get a no-dues certificate after the final payment.

Release security

Get charges satisfied at the ROC and documents returned.

Credit reports

Check credit bureau reports reflect the settlement.

Tax treatment

Account for the waiver and its tax impact.

Withdraw proceedings

Make sure DRT or other cases are withdrawn.

Benefits and responsibilities