The need for OTS arises due to the fact that whenever we initiate recovery proceedings and issue notice u/s. 29 of the SFC’s Act, 1951 to recover our dues from the defaulting companies, the companies  in most of the cases obtain stay orders  from   Hon'ble High  Courts  and  the matter remains pending for  a   long  time.  During   this   period   we are not   able   to   recover   our interest/principal dues from such units as the matter remains subjudice.  In order to improve our recovery from all such cases and also from he chronic defaulters and in order to reduce the Non Performing assets (NPAs) of the Corporation, the mechanism of OTS of dues was evolved.


(a)    The OTS proposal shall be accepted under the following conditions: -

  1. The case for OTS should be considered only when the company is in default for the last 2 to 3 years. During this period PICUP shall ascertain genuiness of the default committed by the company and it will be confirmed that the company is not a willful defaulter.

  2. Incase after availing the credit  facility,  the  company fails  to   implement its project i.e. the company  is  unable  to start   its project at all, such  cases shall  be  considered  for OTS.

  3. In case after implementation of the project, the company is unable to start its commercial production and there is no hope to start the commercial production in near future, such cases shall also be considered for OTS.

  4. In case the company is showing losses in its Balance Sheet for the last 2 to 3 years and there are no sufficient cash accruals to meet out the institutional liabilities.

  5. Present chronic defaulters including the cases under BIFR & litigation, where it has been ascertained that recovery of dues are very difficult and the cases under   the category of Doubtful and loss assets as per the Non Performing Assets  norms prescribed by IDBI.

  6. There are changes in the Govt. policy, which are likely to adversely affect the profitability of the financed unit.

  7. Financial soundness of promoter/particular company who have requested us for OTS shall be examined to ascertain the financial feasibility of proposed OTS.

  8. While considering eligibility, the category of borrower's account (SS, D-I, D-II and Loss Assets) as on 31.3.99 will be taken into consideration.  This is to check the borrower's tendency to slip into the lower category in an attempt to get more waiver/benefits. 

  9. The Corporation will settle only those accounts against  OTS which have been sanctioned by the Corporation.  The Seed capital, margin money loan and other assistances which were extended as an agent of State Govt./IDBI will not be settled by the Corporation but   will be settled separately by the borrower with the  lending institution.

  10. The OTS in standard and sub-standard category would be discouraged.

  11. Non bonafide cases, even if they fall in the preview of  OTS policy shall not be considered for OTS by PICUP.


  1. The OTS will  be decided on the basis of outstanding liabilities on last quarter terminal billing date.

  2. Amount already paid prior to submission of OTS proposal will not be taken into account while considering the OTS.  In other words, the OTS facility will not be applicable with retrospective effect and  any penal and compound interest paid by the borrower in  the past  will  not be considered towards OTS mount.   However, the amount  deposited with the proposal as earnest money will form  a part of the OTS mount.

  3. The borrower will be required to make the payment of interest tax, if applicable in the case, over and above the OTS amount.

  4. ARO  (Accounts Receivable Others) and Watch   & Ward expenses etc. shall be payable by the company over and above the OTS amount.


In all cases the following steps and formalities should be completed before acceptance of any case under OTS:-

(a)    Balance Sheet/Performance Analysis

Balance Sheet/Performance analysis of the unit shall be done in detail which should effective and informative with a view to ascertain the eligibility of the company for OTS.

(b)    Valuation of Assets

In   case  the proposal for OTS is received alongwith  5%  of proposed OTS amount as earnest money by way of D.D. in favour  of PICUP, both  external   & internal valuation of  the  fixed  assets (which have been mortgaged to PICUP) of the unit shall be carried out.  Both the valuation shall be analyzed & put up to  committee for  finalization  of  OTS which shall fix the  valuation  to  be considered  for finalizing OTS.   The amount of OTS should not  be fixed less than the amount of valuation.

(c)    Amount of OTS to be worked out as per matrix

  1. The classification of unit according to the location into fast moving, slow moving and very slow moving areas shall be done according   to the classification proposed  (Annexure-I).  However, a district will be classified in either of the above three categories and no further sub-division of districts shall be considered.
  2. In joint financing cases with UPFC classification of units according to the location as mentioned in point no. 1 above shall be done in accordance with the norms of the lead institutions in that particular case. Further in such cases, a committee shall be constituted which shall include the representative of UPFC also so as to decide the amount of OTS.
  3. The amount of OTS shall be fixed at the amount of valuation or the amount worked out as per the matrix proposed for OTS whichever is higher   (Annexure-II).   However, in exceptional cases (if considered necessary), the case shall be put up to Board for relaxation of the above guidelines.
  4. In respect of units located in slow moving and very slow moving   areas  where joint financing with UPFC is  involved  and outstanding   principal  of  both the institutions  is  less  than Rs. 1.00  crore, valuation of assets shall not be  considered  and OTS    amount  will  be  worked  out  in  accordance    with    the  prescribed  matrix  This will facilitate OTS in  joint  financing cases with UPFC.
  5. No extension of time in case of OTS shall be considered.


The borrower shall deposit at least 5% of the proposed OTS amount as earnest money by way of Demand Draft payable in favour of PICUP along with the OTS proposal to show his sincerity and interest in settling the dues.   OTS proposal not accompanied by D.D. as above shall not be considered by PICUP.

The amount of earnest money shall be adjusted   against  the down  payment  of OTS (if approved) otherwise the same   shall  be adjusted  against the existing dues of the company.  In no case the earnest money shall be refunded to the borrower company.


The amount of OTS shall be fixed based on valuation of the assets of the unit and t he amount prescribed under the matrix as detailed above.   The terms of payment of OTS amount shall be fixed on case-to-case basis based on following: -

  1. Generally units eligible for OTS shall be allowed 12 months time for clearance of the OTS amount.
  2. However units lying closed/non implemented or making losses during the last three financial year may be allowed 18 months time for payment of total amount of OTS.
  3. The company shall be required to make down payment ranging from 15% to 25% of the OTS amount depending upon the merit of each case.
  4. The payment made during first six months in all the above mentioned categories of OTS shall be interest free and for the balance period of OTS, interest at the current lending   rate  of the corporation or document rate whichever is higher shall be charged.   However in case of delay/default the company will be liable to pay penal interest @ 2.5% p.a. and compound interest on the defaulted amount for the defaulted period.