a. Legally. how many months interest should be bank waive as a settlement case?
Ans. There is no compulsion for the Bank to waive interest. The Bank does waive interest in certain cases where it finds the resolution is difficult through legal methods. Instead of dragging the case for years it will come to understanding with borrower lend some motivation by offering waiver of interest. Secondly if the borrower is genuine and poor, and not in a position to repay the dues, then also bank can waive interest. It all depends on your terms with Bank authorities. There isn't any policy, law to compel any bank to waive interest.
b. Can the bank drag the matter and continue to levy interest once the account is NPA ?
Ans. Once the account becomes NPA, the interest application in the account will be stopped and a shadow balance register will be opened which shows the calculation and application of interest, costs, charges etc. This does not mean interest should not be levied (applied) after account becomes NPA. The interest is not applied so that income is not recognized by bank, as part of Income Recognition norms prescribed by RBI. When the DRT issues a Recovery Certificate the bank shows the balance in Shadow balance register as the balance as on some date and also says "plus" future, interest, charges, expenses. Accordingly the DRT issues Recovery Certificate under RDBFI, Act.
c. Are there norms for the borrower to demand for a certain waiver when they are settling in a proactive way?
No. Borrower cannot demand any waiver, whether it is of principal or interest or charges as a matter of right, unless the Bank commits any mistake in its calculation, in such case the borrower can under RDBFI Act, move an application for set off under Section 19.