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NBFC V. Small Business Owner

Date of Claim raised: 05/03/2022
Date of Conciliation: 15/03/2022
Date of Settlement: 20/04/2022
Digest: Mediation/Conciliation/Dispute/Claimant/Respondent/Invoice/Settlement
Case Summary:

The dispute is between an NBFC and an individual borrower who had borrowed Rs. 4,71,111/- for home improvement purposes. The loan was processed by the NBFC basis his finances as a small business owner. The loan at the outset was issued with special approvals as he was almost over-exposed in relation to his income with two other loans that he was servicing. However, the borrower had been servicing his loans on time, but in the later part of the Financial year 2021-22, he started delaying the payments to these loans, and by the end of February 2022, the loan was deemed NPA.

The Issue

Since the borrower was already overexposed, a small change in his income or spending would have rendered him helpless to pay the EMIs, and the other loans he was addressing were secured loans, he was bound to put the unsecured loan on the back burner. However, there was an intention to pay as he had been making partial EMIs throughout the default. However, since the loan had become NPA the same was headed to litigation and was handed over to PrivateCourt for mediation.

The Process

The Mediator, in this case, assessed the outstanding statement and also the payback history of the respondent. When contacted, the borrower expressed his intent to make good on the loan and requested that he be given an extension as he was unable to pay due to the loss of one of his biggest clients. The mediator, in consultation with the NBFC, offered a loan restructure with a waiver of penal interest and an extension in the payback period reducing his monthly EMIs. This was gladly accepted by the borrower, and he agreed to the terms promptly.

The Settlement Term

The NBFC agreed to restructure the dues for the above-mentioned loan at Rs. 4,00,000/-, payable on or before 20th April 2022 in two equal instalments of Rs. 2,00,000/- each, payable on 30th March 2022 and on 20th April 2022, respectively.

The Inference

Establishing the intent to pay and retain a customer, in this case, was a better move than going into litigation.