Can I get a loan account settled through a one-time settlement?

Yes, a one-time settlement (OTS) is a recognised mechanism where the bank agrees to accept a reduced lump-sum amount to close a stressed loan account. It is a negotiated arrangement, and banks often have OTS policies for genuine hardship cases.

Key points

• An OTS allows a borrower to settle a defaulted loan by paying a mutually agreed reduced amount.
• Banks usually offer OTS for accounts classified as non-performing assets (NPAs).
• The settlement terms, including the waiver amount, are negotiated and recorded in writing.
• An OTS may be reported to credit bureaus as "settled," which can affect your future credit.
• Always obtain a no-dues certificate after completing the settlement.

Relevant law

OTS is governed by the RBI's prudential norms and each bank's board-approved settlement policy. There is no single statute mandating OTS, but RBI guidelines on the resolution of stressed assets and each bank's compromise settlement framework apply.

What you can do

• Write to the bank formally requesting a one-time settlement, explaining your hardship.
• Negotiate the settlement amount and get all terms in writing.
• After payment, obtain a no-dues certificate and confirm the account closure.
• Consult a banking advocate in Amritsar to negotiate favourable settlement terms.