If your lender has started calling daily and the repayment calendar looks impossible, breathe. This is fixable. In Karnataka, borrowers resolve stressed loans every month - some through a clean One-Time Settlement, some by negotiating a structured plan, others by using the legal levers that exist for exactly this moment. The goal isn’t to “win.” It’s to get back to normal life without leaving value on the table for either side.

What pushes accounts into NPA here is rarely just “mismanagement.” Bengaluru startups get caught between funding cycles. Industrial MSMEs see payments stuck for 90–120 days with no malice - just a larger buyer who’s slow. Tourism and education businesses in Mysuru wobble with seasonality. Add a few quarters of margin pressure and one bad decision, and suddenly your account crosses 90 days past due. That NPA tag hits credit, triggers recovery actions, and makes casual conversations with bankers very formal very quickly.

You still have options.

One-Time Settlement (OTS) is the cleanest exit when repayment at full value isn’t realistic. Think of it as a hard reset: pay a negotiated lump sum, settle the account, and stop the interest snowball. To get to “yes,” you need three things: evidence of real hardship (audited losses, medical events, vanished contracts), a believable source of funds (own savings, family, asset sale, or a short bridge), and a proposal that shows why immediate partial recovery is better for the bank than spending a year in enforcement. Put it all in writing. Keep it simple. If the lender counters, don’t drag - close the gap while momentum exists. When it’s done, insist on the exact closure status in writing and follow up until the bureau reflects it.

If you have hard collateral and time is already tight, SARFAESI is the channel your banker may push because it’s straightforward on secured loans. A 60-day notice, a chance to respond, and then enforcement if there’s no resolution. Here, your job is to act before the auction calendar is set. If you can arrange funds or a third-party buyer to clear dues, do it early. Once the public sale process starts, emotions don’t help and the sequence tends to run its course.

When the borrower is a company and there’s genuine enterprise value - customers, brand, order book but crushing liabilities, the IBC route via NCLT can be the responsible reset. It pauses creditor actions, invites resolution plans, and tries to preserve the business rather than simply selling pieces. It’s technical, controlled by timelines, and requires professional hands. Don’t walk in alone. If IBC is on the table, go in with a clear story: what failed, what survives, and why this business deserves fresh oxygen.

Don’t overlook Lok Adalat. For smaller-value matters or where both sides are already close, this is often the fastest, least dramatic way to sign a practical settlement and move on. It works because everyone knows the alternatives are slower and costlier. Karnataka has a deep bench network for this - show up prepared and you can sometimes close in a day.

Now, about funding. Banks can’t always take over stressed exposure due to rules, and NBFCs might be full on sector limits. That’s where private credit and ARC-driven solutions come in. In Bengaluru, there’s a growing ecosystem of alternative lenders willing to back time-bound resolutions: short bridges to close OTS, last-mile capital for viable assets, or structured debt to refinance a snarled stack. Pricing is higher, yes, but so is the value of speed when every month adds penalties, calls, and reputational damage. Use this capital with discipline: one purpose, one timeline, one exit.

Here’s a simple five-step plan that works on the ground:

1.) Map the problem honestly. Print your last 12 months’ bank statements. Build a 6–9 month cash flow. List every liability. No polishing. You need the real picture to make the right ask.

2.) Choose the path upfront. If you want OTS, don’t show up empty - show up with a number, proof of funds, and a date. If it’s an IBC candidate, gather board approvals and line up a professional early. If Lok Adalat is viable, target the next date and prepare your terms.

3.) Control the paper trail. Minutes of meetings, countersigned emails, sanctioned terms, payment acknowledgments. After closure, chase the bureau update. Many good settlements are tarnished by sloppy follow-through.

4.) Don’t negotiate alone. A calm, experienced advisor pays for themselves in a week - by avoiding one misstep, one bad sentence in a proposal, or one missed compliance point that forces a reset.

5.) Protect tomorrow’s credit. If you settle, prioritize clear language on “settled/closed” status and follow up until it reflects correctly. If you restructure, diarize covenants and set alerts so you never miss a date again.

Karnataka-specific watchouts:

1.) Recovery climates shift. Micro and small loan practices have been under scrutiny; lenders are cautious, and field behavior is being watched closely. Use that moment for sensible dialogue, not brinkmanship.

2.) Lok Adalat is underused by borrowers. If your matter fits, this can be the quickest closure on the calendar.

3.) MSMEs often wait too long. Don’t. By the time you get a sale notice, choices shrink and costs rise.

If you need deeper, Karnataka-focused reading, two pieces worth slotting on your page: your state-wide NPA financing overview (for city-by-city context) and your guide on navigating complex finance problems (for sequencing decisions). For official references on definitions and process, point readers to the RBI (definitions and prudential norms), NCLT (IBC steps and benches), and KSLSA (Lok Adalat schedules).