What is One Time Settlement?

One Time Settlement (OTS) is an effective tool used by banks to reduce NPAs from their books. This scheme allows borrowers to settle their loans by paying a reduced amount, typically within a short timeframe (3 to 6 months). For borrowers facing financial stress, OTS can provide much-needed relief by waiving a significant portion of their outstanding dues.

Why Do Banks Offer OTS?

Manage NPAs: Banks use OTS to clean up their balance sheets and reduce the number of overdue accounts.
Financial Relief for Borrowers: By offering waivers on interest and legal charges, OTS helps borrowers repay loans at a reduced amount.

Benefits of OTS

Substantial Waivers: Borrowers can receive waivers of 20-50% on the total outstanding loan.
Debt Settlement: Enables borrowers to clear their dues completely within a stipulated time.
Stress Relief: Ideal for borrowers facing financial constraints, as it simplifies the repayment process.

Who Can Apply for OTS?

Borrowers whose loans are categorized as NPAs (due to missed payments exceeding three months) can apply for OTS, provided they are not marked as willful defaulters.

Step-by-Step Process to Apply for OTS

1. Draft an Application

Start by drafting an OTS application addressed to your bank. In this application:

Mention a proposed repayment amount.
Provide valid reasons for the settlement.
Specify the timeframe within which you can repay the agreed amount.

2. Make Initial Payment

Deposit 5-10% of the proposed settlement amount in a no-lien account. This amount will either be adjusted in the final settlement or kept secure if the application isn’t approved.

3. Approval Process

Once your application is submitted, the bank evaluates it based on:

Value of collateral or assets.
Age of the account.
Sources of funds for repayment.

4. Final Payment

Pay 25% of the settlement amount upon approval.
Repay the remaining balance within 90 to 180 days as per the bank’s agreed terms.

Conditions for OTS

Borrowers can repay using their own funds or obtain financing from third parties.
Some lenders may require collateral worth at least twice the loan amount.
OTS financing is available across India, subject to lender policies.