Key aspects of secured NPA private funding:

• NPA Borrowers: Individuals or businesses whose loan accounts are classified as Non-Performing Assets because of missed payments (typically 90 days or more).
• Private Lenders: Funding comes from NBFCs or other private finance companies, not traditional banks.
• Security (Collateral): The new loan is secured, meaning the borrower offers collateral (like property) as security against the loan, similar to the original loan.

Purpose of the Loan

• To clear the outstanding liability on the existing NPA account.
• To enable a One-Time Settlement (OTS) with the original bank or lender.
• To provide additional funds for business or personal needs.

Process:

• The private lender directly pays the original bank to close the NPA account.
• The collateral (security) is often transferred to the new private lener.
• The borrower is then free from the previous NPA status and the associated legal issues.

Benefits for the Borrower:

• Removal of the NPA status from their credit report.
• Improvement of their CIBIL score.
• Ability to take new loans from standard banking channels.
• A new, often more flexible, repayment plan.