Law4u - Made in India

Can a one-time settlement (OTS) be negotiated with banks for recovery?

02-Feb-2025
Recovery

Answer By law4u team

Yes, a one-time settlement (OTS) can be negotiated with banks for recovery of dues under Indian law. An OTS is a financial arrangement where a borrower or debtor agrees to pay a lump sum amount to settle outstanding debts, usually at a discounted rate. This is often offered when the borrower is unable to repay the full amount of the loan due to financial difficulties. Key Points about One-Time Settlement (OTS) with Banks: Eligibility: OTS is typically offered by banks to individuals or businesses who are unable to repay their loans in full. It is more common in cases where the borrower has defaulted on the loan for a long period and has no means to repay the full amount. Negotiation Process: Borrowers can approach the bank to negotiate an OTS. The bank may agree to reduce the outstanding amount, accepting a lump sum payment that is lower than the total dues. The exact terms of the settlement are subject to negotiation and the bank's internal policies. Discounted Amount: The amount to be settled through OTS is usually less than the outstanding principal and interest. Banks assess the financial position of the borrower and may offer a significant discount based on the likelihood of recovering the full debt. Agreement Terms: The settlement terms should be documented in a formal agreement. Once the OTS amount is paid, the bank usually releases the borrower from further liability for the loan, and the settlement is considered final. However, the borrower must ensure that the payment is made in the agreed timeframe to avoid legal complications. Impact on Credit Score: While an OTS helps resolve the debt, it may impact the borrower’s credit score. The settlement is typically recorded as a “settled” account, which can negatively affect the credit report. However, it is still better than having an account marked as “written off” or “delinquent.” Legal Framework: Banks are not legally bound to accept an OTS offer, and they may reject the proposal if they believe that they can recover the full amount through other means. However, they may offer an OTS as a way to recover part of the debt if the borrower is facing genuine financial distress. Regulations: The Reserve Bank of India (RBI) has set guidelines for OTS, ensuring that banks follow transparent procedures while offering such settlements. Banks are encouraged to assess each case individually and negotiate settlements fairly. In summary, negotiating a one-time settlement with banks is a common practice in India, but it depends on the bank’s policies and the borrower’s financial situation. It’s advisable for borrowers to engage with the bank early and seek professional advice to understand their options.

Recovery Verified Advocates

Get expert legal advice instantly.

Advocate Vishal Dubey

Advocate Vishal Dubey

Anticipatory Bail, Arbitration, Armed Forces Tribunal, Bankruptcy & Insolvency, Banking & Finance, Breach of Contract, Cheque Bounce, Child Custody, Civil, Consumer Court, Corporate, Court Marriage, Customs & Central Excise, Criminal, Cyber Crime, Divorce, Documentation, GST, Domestic Violence, Family, High Court, Immigration, Insurance, International Law, Labour & Service, Landlord & Tenant, Media and Entertainment, Medical Negligence, Motor Accident, Muslim Law, NCLT, Patent, Property, R.T.I, Recovery, RERA, Startup, Succession Certificate, Supreme Court, Tax, Trademark & Copyright, Wills Trusts, Revenue

Get Advice
Advocate Ajeet Kumar Singh

Advocate Ajeet Kumar Singh

Anticipatory Bail, Banking & Finance, Cheque Bounce, Child Custody, Civil, Court Marriage, Criminal, Cyber Crime, Divorce, Documentation, Domestic Violence, Family, High Court, Insurance, Motor Accident, Muslim Law, R.T.I, Recovery, Succession Certificate, Supreme Court, Startup

Get Advice
Advocate Dilip Fojmal Jain

Advocate Dilip Fojmal Jain

Motor Accident, RERA, R.T.I, Property, Succession Certificate, Revenue, Landlord & Tenant, Domestic Violence, Criminal, Civil, Cheque Bounce, Anticipatory Bail, Breach of Contract, Cyber Crime, Documentation, Divorce, Family, Recovery, Tax

Get Advice
Advocate Sharad Parashar

Advocate Sharad Parashar

Breach of Contract, Cheque Bounce, Civil, Consumer Court, Corporate, Criminal, Divorce, Family, High Court, Insurance, Medical Negligence, Motor Accident, Tax, Domestic Violence, RERA, Recovery, Wills Trusts, Revenue, Succession Certificate, Property, Court Marriage

Get Advice
Advocate Aditya Vikram Tiwari

Advocate Aditya Vikram Tiwari

Banking & Finance, Recovery, Civil, Property, Revenue

Get Advice
Advocate Vijender Kumar Bhardwaj

Advocate Vijender Kumar Bhardwaj

Anticipatory Bail, Arbitration, Armed Forces Tribunal, Bankruptcy & Insolvency, Banking & Finance, Breach of Contract, Cheque Bounce, Child Custody, Civil, Consumer Court, Corporate, Court Marriage, Customs & Central Excise, Criminal, Cyber Crime, Divorce, Documentation, GST, Domestic Violence, Family, High Court, Immigration, Insurance, International Law, Labour & Service, Landlord & Tenant, Medical Negligence, Motor Accident, Muslim Law, NCLT, Patent, Property, R.T.I, Recovery, RERA, Startup, Succession Certificate, Tax, Wills Trusts, Revenue

Get Advice
Advocate Namratha

Advocate Namratha

Anticipatory Bail, Breach of Contract, Cheque Bounce, Civil, Divorce, Documentation, Criminal, Arbitration, Child Custody, Domestic Violence, Family, High Court, Landlord & Tenant, Recovery, RERA, Succession Certificate, Wills Trusts

Get Advice
Advocate Manish Luthra

Advocate Manish Luthra

Bankruptcy & Insolvency, Banking & Finance, Breach of Contract, Cheque Bounce, Civil, Consumer Court, Customs & Central Excise, Anticipatory Bail, Arbitration, Child Custody, Court Marriage, Corporate, Criminal, Cyber Crime, Domestic Violence, GST, Divorce, Documentation, Family, High Court, Immigration, Insurance, International Law, Labour & Service, Landlord & Tenant, Media and Entertainment, Medical Negligence, NCLT, Motor Accident, Patent, Property, R.T.I, Recovery, Succession Certificate, RERA, Startup, Trademark & Copyright, Supreme Court, Tax, Revenue, Wills Trusts

Get Advice
Advocate Mahendar B

Advocate Mahendar B

Anticipatory Bail,Banking & Finance,Breach of Contract,Cheque Bounce,Child Custody,Civil,Consumer Court,Court Marriage,Customs & Central Excise,Criminal,Cyber Crime,Divorce,Domestic Violence,Family,High Court,Insurance,Landlord & Tenant,Media and Entertainment,Medical Negligence,Motor Accident,Muslim Law,Property,Recovery,Succession Certificate,Wills Trusts,Revenue

Get Advice
Advocate Mohan Lal

Advocate Mohan Lal

Anticipatory Bail, Cheque Bounce, Child Custody, Civil, Consumer Court, Criminal, Cyber Crime, Domestic Violence, Divorce, Family, High Court, Motor Accident, Succession Certificate, Revenue, Recovery, Muslim Law, Court Marriage, Arbitration, Armed Forces Tribunal

Get Advice

Recovery Related Questions

Discover clear and detailed answers to common questions about Breach of Contract. Learn about procedures and more in straightforward language.