How Does The One-Time Settlement (OTS) Scheme Work For NPAS

Non-Performing Assets (NPAs) have been a significant challenge for the banking sector, affecting the financial stability of institutions and the economy. To address this issue, the One-Time Settlement (OTS) scheme has emerged as a pragmatic solution. At Finlender, we aim to demystify the OTS scheme, providing you with comprehensive insights into how it works and its benefits.

What is a One-Time Settlement (OTS) Scheme

A One-Time Settlement (OTS) scheme is a financial mechanism designed to recover NPAs by offering borrowers an opportunity to settle their outstanding dues at a reduced amount. This scheme is typically employed when there is little chance of recovering the full amount owed. By offering a mutually agreed-upon reduced payment, banks can clean up their balance sheets, and borrowers can clear their debts without prolonged litigation or further financial strain.

How Does the OTS Scheme Work

  1. Identification of Eligible Accounts: Banks identify NPAs that are eligible for the OTS scheme. Generally, these include accounts where the chances of full recovery are minimal and where the borrower shows willingness to settle.
  2. Assessment of Settlement Amount: The bank assesses the borrower’s financial situation and determines a feasible settlement amount. This amount is typically less than the total outstanding dues but is considered reasonable for recovery.
  3. Proposal to the Borrower: The bank presents the OTS offer to the borrower, detailing the reduced settlement amount and the terms and conditions. This proposal includes a deadline for acceptance and payment.
  4. Acceptance and Payment: The borrower reviews the offer and, if agreeable, accepts the terms. The borrower then pays the agreed-upon settlement amount within the stipulated period, either in lump sum or through a structured payment plan.
  5. Closure of Account: Upon receiving the full settlement amount, the bank closes the NPA account. The borrower receives a No Dues Certificate, indicating that the debt has been fully settled.

Benefits of the OTS Scheme

For Borrowers:

  • Debt Relief: Borrowers can settle their debts at a reduced amount, alleviating financial stress.
  • Credit Score Improvement: Settling NPAs can improve the borrower’s credit score, enabling access to future credit facilities.
  • Avoiding Legal Action: The OTS scheme helps borrowers avoid prolonged legal battles and associated costs.

For Banks:

  • Recovery of Funds: Banks can recover a portion of the outstanding dues, enhancing their liquidity and financial health.
  • Reduction in NPAs: Successful settlements help reduce the NPA levels, improving the bank’s overall asset quality.
  • Administrative Efficiency: The OTS scheme streamlines the recovery process, reducing the administrative burden of managing long-standing NPAs.


At Finlender, we believe that the One-Time Settlement scheme is a win-win solution for both borrowers and banks. It provides a practical approach to resolving NPAs, fostering a healthier financial ecosystem. By understanding the nuances of the OTS scheme, borrowers can make informed decisions, and banks can enhance their recovery strategies, contributing to a more robust banking sector.

For more information and personalized financial solutions, visit Finlender. Your financial well-being is our priority.

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