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Harsh (None)     18 September 2019

One time settlement through bank

Respect Sir,

My Query relates to One Time Settlement of a Housing loan whereby Punjab National Bank has issued a letter to pay entire OTS amount(i.e 25 % Upfront money+rest of the amont) in just 9 days. Is it violation of any OTS guidelines issued by RBI etc.

Here is the Case:-

One of my known has defaulted in Hosuing loan.

The Market price of the house was valued at around 65 Lakhs in March-2016 and Bank gave loan of around 58 Lakhs. There was default in payment and the account has gone NPA in June-2018.

The Bank auctioned the property for 61 Lakhs for the first time which failed than again in 55 Lakhs which failed than 47 Lakhs failed again. During all these auction bank was telling the borrower that you also search for the buyer and no need to represent or write or litigate and we will settle your account under One Time Settlement (OTS). 

Finally the Bank again opened bid for 43 Lakhs and it was again told that OTS will be done, but at the last momemt just before 10-12 days of the auction date bank refused to do OTS and said they have received one Bid and will not do any OTS now.

The borrower found himself in complete fix and represented in writing to the bank that his property which was valued at around 65-70 Lakhs and Bank itself has given loan on that basis is auctioned on just 43 Lakhs in just 8 Months. He gave copy of that letter to regional office of the Bank and also raised question on the manner in which his property value is slashed down by 40 % in just 8 Months. He further asked to get his account settled under OTS for Rs 44 Lakhs if the Bank itself is determined to sell it for 43 Lakhs.

The Bank Manager got annoyed but issued a letter on 09.09.2019 in writing to deposit 25 % as upfront money for OTS Proposal and rest full and final amount of Rs 47 Lakhs as OTS amount on or before 17.09.2019 (i.e date of auction)

The bank in its letter didn't gave much time to deposit such a huge amount and just gave 9-10 days to pay the full OTS amount.

The borrower requested the Bank to accept 25 % upfront (in oral on the last day i.e 17.09.2019) and give him some time but the Manager said he will not accept the request as it is wriitten in the letter that entire amount is to be paid by 17.09.2019 and if request is been submitted in his branch he can not assure that whether the 25 % amount as furnished will be adjusted against the actual loan account or as OTS. Taking his words, the borrower got frightened that his amount may be adjusted against the loand didn't deposited even the 25 %.

The property was finally sold off for 46.60 Lakhs on Auction on 17.09.2019 (Two Bidders)

Is it violation of any OTS guidelines issued by RBI etc whereby a borrower who is already in  economical and financial distress is being asked to pay such huge amount in within a short span of 09-10 Days. Isn't the bank should have asked to submit 25 % upfront and have given some time for the Balance amount. Had this would have been the case , the borrower would have arranged the rest of the amount in some days and have sold the property outside and would have got rid of the debt/loan.

As the property is now sold for 46.60 Lakhs and Bank has already offerred 47 Lakhs as OTS. Can something can be done out of this. What can be done ?  Please Guide.









 1 Replies

Isaac Gabriel (Advocate)     18 September 2019

It is not a legal query. It is the dicretion of the banker. However, you can negotiate with higher officals about the deliberations and try to reach an understanding.

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