Can I settle a loan even after it is declared NPA?

Answer

A:

Yes, you can settle a loan even after it has been classified as an NPA. In fact, banks often become more open to settlements at this stage because they want to recover dues and close bad accounts.

What Is an NPA?

A loan is declared an NPA (Non-Performing Asset) when:

• EMI payments are overdue for more than 90 days.

• The account is considered non-performing for the bank’s financials.

Once declared NPA, the bank may:

• Start recovery proceedings under the SARFAESI Act.

• Refer the case to DRT (Debt Recovery Tribunal).

• In some cases, sell the debt to an asset reconstruction company (ARC).

Settlement After NPA – Your Legal Options

1. One-Time Settlement (OTS)

• Banks often offer a One-Time Settlement to NPA account holders.

• You pay a negotiated lump sum (less than the total due).

• In return, the account is closed and marked as “Settled” in CIBIL.

2. Negotiation Window

• Since the bank wants to recover at least part of the money, you have leverage to negotiate the principal, interest, and penalty waiver.

• Always get the settlement offer in writing.

3. Avoiding Legal Escalation

• If you settle before the bank takes legal action, you can avoid civil suits or property attachment.

• If litigation has started, you can still file a compromise application in court.

Important Considerations

• CIBIL Impact: Even after settlement, your credit report will show "settled" status for 7 years. It may affect future loan eligibility.

• No Dues Certificate: Ask for this after full and final settlement to protect yourself legally.

• Asset Sale: If secured, the bank may still move to seize your asset unless settlement terms are accepted and followed.

How Legals365 Can Help

Legals365 supports you with:

• Evaluating and negotiating settlement offers

• Preparing legal settlement agreements and documentation

• Communicating with banks or NBFCs on your behalf

• Ensuring proper CIBIL reporting and issuance of a No Dues Certificate

Need Legal Guidance to Settle Your NPA Loan?
Visit: www.legals365.com
Call: +91 9625961599

Advocate B.K. Singh and the Legal365 team can help you lawfully settle your NPA and prevent further legal trouble.