What Legal Options Are Available for Loan Settlement in West Bengal?
Loan default can affect everything around you. Be it maintaining the house, the salaried individual may be concerned with cuts in his/her salary and the business owner may be struggling to meet up the demands made by the lender in Kolkata.
Loan settlement in West Bengal is one of the solutions for those who qualify to avail it. However it cannot always be availed. The options are One Time Settlement (OTS), Loan restructuring or negotiate to pay in installments/ Respond to legal notice / take appropriate legal action. The options vary as per the type of loan and how much hardship you have faced and where the loan currently stands.
Loan Settlement Agency assists borrowers who are looking for loan settlement. We assist you on various options available, documents that need to be submitted and communication to the lender. The right course of action varies from case to case and is decided based on documents.
In this article we will discuss about the options available to a borrower who is struggling to pay loans in Kolkata, Howrah, Durgapur, Siliguri, Asansol and other places in West Bengal. We will also tell you about some of the pitfalls you should know before going for loan settlement.
Why Does Loan Settlement Matter in West Bengal?
Borrowers in West Bengal come from all walks of life. They could be salaried individuals who live in cities like Kolkata or Howrah. It could be someone who trades goods in their city or run a transportation business. Even small scale manufacturers and business owners in Durgapur and Asansol. There could be many reasons that may make a person unable to repay a loan that was easily manageable previously. Decrease in income can be one reason.
Loan will accrue penalties as prescribed by the lender. Once your loan falls under the purview of being in default. Lender may also report your information to credit bureaus. Further recover the loan from you based on your loan contract and laws in place. If you have taken a secured loan then lender may also resort to seizing your property that you have used as security.
One thing that a borrower must differentiate between. Settlement vs Taking legal action on wrongful recovery done.
RBI has issued guidelines on Compromise Settlement which was dated 8th of June 2023. Banks and Regulated Entities have to keep provisions in place to carry out a Compromise Settlement. This does not mean that you as a borrower are entitled to get a Compromise Settlement on every loan.
It is advisable to know how much you owe and what options the lender can provide you. Also reply to any legal notice that you receive in due course. You can review our legal notice reply service for related assistance.
Quick Facts
- Loan Settlement is an option available to borrower who owes a loan.
- In case of One Time Settlement (OTS) you might pay a lesser amount than what the lender claims you owe.
- Banks and financial Institutions will take into account if it wants to settle a loan based on certain policies that it has in place.
- You can also approach your bank or financial institution for loan restructuring if you are in a position to repay.
- Just because you apply for a loan settlement does not mean that recovery on your loan or auction of secured property will halt.
- Your loan will be shown as settled and not as fully repaid on your credit bureau report. This might reflect in your future loan applications.
- Always get settlement terms in writing before making any payment towards your loan settlement.
What Is Loan Settlement and How Does It Work?
Loan settlement means your lender will allow you to clear your loan with certain conditions that he/she deems fit. Your lender may ask you to pay a smaller amount than what it thinks you owe. Make sure that your loan and what you owe is clearly stated on your loan settlement terms.
Let us assume that you own a shop in Howrah and were doing good until recently you lost a customer whom you owed most of your profit to. Now your shop isn't giving you enough money to clear the entire debt you owe. But you are in a position to give a certain lumpsum to clear your loan debt. You can send your One Time Settlement offer to the bank with proper documents backing your hardship.
Bank will take into account your offer and decide if it wants to accept it or not. Or maybe the bank might give you another offer to clear your debt.
Technical Write Off is not the same as a Loan Settlement. When your lender technically writes off your loan it simply means that they consider that loan to be non performing asset in their books. The RBI guidelines have stated that both are different things and there is no relation.
What Legal Options Are Available for Loan Settlement in West Bengal?
There are a few options that you have available to you if you are trying to negotiate a loan settlement in West Bengal. You may not need all of them or may have to use all of them depending on your situation.
One Time Settlement (OTS)
One Time Settlement is suitable for those who may not be able to pay the entire amount owed. But can offer a lumpsum to the lender to settle their dues. Always give a valid explanation of why you can not pay more than what you are offering. State the amount you want to pay and when you can pay it.
As mentioned above banks and other financial institutions will evaluate your request and decide if they want to accept your OTS offer. They may not always agree to accept your OTS request. Read more about loan settlement and OTS FAQs to understand general borrower questions.
Loan Restructuring/ EMI renegotiation
If your current scenario is due to a temporary setback and you believe you will be in a position to pay your installments in future. It would be best to look into restructuring or renegotiating your EMI's. You can always ask your bank if they have such provisions and are open to your request.
You can negotiate with your bank to reset your installments and give you more time to clear your debt. Do not take it for granted that your EMI's will be stopped just because you applied for it.
Negotiate with your Bank/ NBFC
If your lender is a bank you can reach out to them through various means of communication. Banks have separate department that are designated for loan recovery or you can talk to your respective branch manager. If your offer is valid they may accept it or make a counter offer that you can consider.
Always keep a copy of any communication that you do with your bank/ NBFC. If you have asked to reset your EMI's or are asking for loan settlement. If they come up with an offer that you feel will work for you read the terms carefully before accepting it.
Legal Notice Response
If you have received any type of legal notice from your bank. It can be a simple legal notice, Demand Letter/ Arbitration Notice/ Notice of motion filed by Court or Notice served on you. Look into each of them and see if it warrants a legal action. Maybe your bank miscalculated your amount owed. Perhaps you have made payment to the lender and they didn't receive it or maybe the notice itself is wrong. There are various possibilities and a legal professional can assist you better if your matter is of serious nature.
Don't sit on the problem hoping that by applying for a Loan Settlement you can skip replying to a notice. This can lead to adverse results that you may not want.
Which Laws and Rules Apply to Loan Settlement?
Laws that apply to a loan can be many and are dependent on what kind of loan it is and from which lender. Here is some brief information about what you need to know before applying for Loan Settlement.
Loan Settlement Rule by RBI
The RBI issued its rule book on 8th June 2023 regarding technical write offs and Compromise Settlements. Any entity that comes under the purview of this rule will have to follow the guidelines set by the central bank. Which includes how and who should carry out these settlements. It also covers situations where settlement can happen during pendency of court case and more.
This rule is meant to enforce how banks handle loan settlement cases. It does not entitle you to ask for less money from your bank. So it is still important to find out what rules your bank follows before applying.
Section 13 of SARFAESI Act 2002
Secured loan taken by you from a creditor is subject to section 13 of SARFAESI ACT 2002 if you fail to honor the dues. If you have received a 13(2) notice then you have 60 days to pay the amount demanded by the Creditor.
If they carry out section 13(4) of the act you are allowed to challenge their actions under section 17 before Debt Recovery Tribunal.
Applying for OTS will not stop a bank from taking any action under section 13(4). Consult with a Lawyer if your secured property is at stake. Ask them to verify your dates and when the notice was received by you.
Court Proceedings
In case your bank has taken you to Debt Recovery Tribunal (DRT) you can continue to communicate with your lender. Whether you want to settle or contest it is up to you. Just make sure that whatever you decide to do doesn't contradict with each other.
Don't expect that you have sent a settlement offer and the case will be closed. Make sure to ask the correct procedure to close your case. And that you receive appropriate documentation.
Who can use Loan Settlement services?
There are a lot of people who may require loan settlement guidance. Here are some common examples.
- Someone who worked for an organization and now their salary has decreased. Or maybe they lost their job and their monthly expense has increased drastically.
- Small business owners who may not be able to maintain the installment that was easy previously.
- Someone who has availed Credit Card Loans or Personal Loan and can't seem to manage paying all their debts.
- Have received any type of Notice and would like to know what options you have before replying to that.
- You were a Guarantor on a loan and are now being asked to pay for the debtor.
If you can maintain your current installments then Loan Restructuring might be a better option. If you know you won't be making your installments anytime soon then OTS might be an option. Analyze your situation before jumping to any conclusion.
Steps to follow for Loan Settlement
Here are some tips that you can follow when you want to approach Loan Settlement.
Check your Loan Account
Know how much you owe on your loan. Gather documents like your Sanction letter, Loan agreement and current loan statement. See if the loan amount owed by you is correct. If you think something is not right with the information. Mention it to your lender in writing before you accept an offer.
Assess yourself financially
Once you know what you owe make sure you are in a position to offer a amount that you can comfortably pay. Don't go and take a loan from somewhere else just to offer a higher number to the bank. If the number you are giving the bank is not something that you can manage within stipulated time frame then they will not accept it.
Find out what you want from your lender?
If your issue is with paying your current EMI and want to increase your tenure. Or you want to settle your loan and are sending in a OTS application. Understand what you want to achieve before you start approaching your bank.
Apply for Loan Settlement in Writing
Now that you have identified what you want. You need to approach your lender about it. Give them a valid reason of why you can't pay more and show them your proposal of what you can pay. Save all your communications that you do with the bank and keep a record of your requests and responses from your lender.
Verify the Offer that you receive
Once you receive an offer from your bank look through the offer and understand what is expected of you. Maybe there are multiple payments to be made or one large installment. Ask about any consequences of not clearing your debt within time frame. Get it in writing from your bank that this offer is true and legitimate. If there are court proceedings on hold talk to your lawyer about what you should do.
Clear your debt according to offer
Pay your bank what they have asked you to. Keep all receipts and records safe. After you have paid the amount they asked you to. Get some proof from them that you have settled your debt and that the matter is over. If you are in a court case you may need further documentation to prove your settlement.
Look into your Credit Report
After your loan has been cleared from your bank look into what is reported on your Credit Bureau report. It may reflect as settled or as full and closed. If it looks like something is not right you can bring it to their attention. Settlement will not help you in getting a better CIBIL score right away. So make sure you know what is on your credit report.
What Documents Should You Prepare?
List of Documents for Loan Settlement
- Sanction letter for your Loan and Agreement
- Your Loan statement and installments
- Bank Statement of Income and Expenditure. Show where your money comes from.
- If you have lost your job mention that with documents
- Proof that you have less income if you are a business owner.
- Any medical bills or anything that may show your hardship.
- Copy of previous Loan Settlement Application that you may have sent in.
- Any Recovery Letters or Notices that you have received.
- Details of Collateral/ Guarantor that you have if any.
- Copy of any payment receipt or Offer from Lender
These are basic documents that you will need. You may have other documents that could benefit you and should be submitted to the lender.
For help understanding documentation and communication about disputed recovery, you can also explore our RBI complaint assistance information.
How Long Does Loan Settlement Take?
There is no time limit that banks have to abide by to accept your OTS request. It could take some time to get your loan approved. If you have received a Notice from the bank don't wait for the settlement team to approve your request before responding to the notice.
If they have given you time to pay make sure you have all the terms in writing. If you can't pay within the time limit ask for more time from the bank in writing. Never assume that they will give you more time. If your Loan is Secured and has been referred to Court/ DRT speak with a Lawyer and keep yourself informed.
When should you contact a Lawyer?
If you have been rejected by the lender and owe more than what you thought. You may have a guarantor that was notified to pay for the debt. Or you think something went wrong during your recovery process. Consult with us on our website to understand what your next step should be.
Sometimes you may have too many loans in default that you can't pay all of them. We can assist you in finding your next step. Please consult with a lawyer if you require one. Loan Settlement Agency does not provide legal advice and will let you know when your matter needs to be addressed by a Lawyer.
How can we assist you with Loan Settlement?
We are here to assist you with your Loan Settlement. You don't have to be sitting in west Bengal to get us to help you with your Loan Settlement. We can assist you on OTS Applications, Documentation, Help with Recovery Complaints. Speak to us about how you received the notice.
For borrowers facing repeated or inappropriate collection conduct, our recovery harassment complaint assistance page provides further service information.
Frequently Asked Questions
1. Can we do loan settlement in west Bengal?
It all comes down to mutual agreement. As long as the borrower is able to fulfill there conditions they may come to a settlement with there bank. It's all up to them.
2. Will bank do One Time Settlement(OTS)?
You can give them a proposal on how much you can pay them and what your situation is. They might or might not accept it.
3. Can I settle my personal loan?
If you are located in Kolkata you can contact your bank/NBFC to ask about there loan settlement policy. They will give you information about how much is due and if there is a settlement for that. You can also read about personal loan settlement options.
4. Will doing loan settlement damage my cibil score?
Yes it could affect your credit score if you take a loan in the future they might reject you. It all depends on how your loan is marked.
5. Can the bank deny me loan settlement?
The bank can deny you at any time but if you feel you can come to a settlement with them provide more information that you may have a hard time paying.
6. If I do a loan settlement will the recovery agents stop calling?
You can always complain about there actions once you have sent the settlement to the company.
7. What do you need to do loan settlement?
You would need your loan documents and bank statements and anything that would benefit your case.
8. If I receive a notice from the bank can I still do a settlement?
Once you get a notice from the bank you can reach out to them about doing a settlement on the loan but be sure to know your deadline.
9. Can loan settlement help me from having my house auctioned off?
No just because you do a one time settlement won't stop your house from being taken if your behind on payments make sure you talk to your attorney.
10. Can Loan Settlement Agency help me?
They will teach you how to approach your bank to help you out with the settlement and documents needed. Your outcome depends on your situation and how they decide.
Final Thoughts
There can be many options available to you if your loan has become unmanageable in West Bengal this will depend on what type of loan and at what stage of recovery your loan has reached. OTS could work for you if you are able to manage a settlement figure. Loan restructuring could work if your loan is payable under certain parameters.
Make sure you read all notices received do not listen to verbal agreements or pay any money that you are not 100% sure on terms for in writing. If there are enforcement of property or Tribunals involved, speak to a solicitor as soon as possible.
Loan Settlement Agency can assist you with this process. They can find settlement options for your situation and get documents in order. Once assessed you can choose to take action that works for you.