Glossary
Debt Settlement Terms, In Plain English
The jargon banks and recovery agents use — OTS, NPA, NOC, DPD, ‘Settled’ vs ‘Closed’ and more — explained simply, so you always know where you stand.
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- One-Time Settlement (OTS)
- An arrangement where a lender agrees to accept a single reduced lump-sum payment to fully close an outstanding loan or credit-card account, instead of the full balance owed. It is the formal mechanism behind debt settlement.
- Debt Settlement
- The process of negotiating with a lender to repay less than the total outstanding amount, settling the account for a mutually agreed reduced figure — typically 40–75% of the dues in India.
- Non-Performing Asset (NPA)
- A loan or credit-card account on which payments are overdue for 90 days or more. Once classified as an NPA, the lender has effectively recognised a loss risk and is often more open to a negotiated settlement.
- No-Objection Certificate (NOC)
- A document issued by a lender after a loan is fully settled or closed, confirming that no dues remain and the lender has no further claim. It is essential proof that your account is resolved.
- CIBIL Score
- A three-digit credit score (300–900) issued by TransUnion CIBIL that reflects your creditworthiness. Lenders check it before approving credit. Defaults and settlements lower this score.
- 'Settled' Status
- A credit-report remark indicating the lender accepted less than the full amount to close the account. It is treated as a negative marker and typically stays on your CIBIL report for about 7 years.
- 'Closed' Status
- A credit-report remark indicating the account was repaid in full and closed normally. This is the ideal status and does not carry the negative weight of a 'Settled' remark.
- Days Past Due (DPD)
- The number of days a payment is overdue, shown month-by-month on your credit report. Higher DPD values (e.g. 30, 60, 90+) signal worsening delinquency to lenders.
- Write-off
- When a lender removes an unrecoverable loan from its active books as a loss. A written-off account is often easier to settle for a lower percentage, but it still shows negatively on your credit report until resolved.
- Recovery Agent
- A third party authorised by a lender to collect overdue dues. Under RBI rules they may only contact borrowers between 8 AM and 7 PM and cannot threaten, abuse, or publicly shame them.
- RBI Ombudsman
- An official grievance-redressal authority of the Reserve Bank of India. Borrowers can escalate unresolved complaints — including recovery-agent harassment — to the Ombudsman, free of charge, via cms.rbi.org.in.
- Fair Practices Code
- RBI guidelines that govern how banks, NBFCs and their recovery agents must treat borrowers — covering transparency, permissible contact hours, and a prohibition on harassment or coercive recovery.
- Section 138, Negotiable Instruments Act
- The legal provision that makes a bounced (dishonoured) cheque a criminal offence. Ordinary loan or credit-card default is civil, but a cheque that bounces can attract criminal proceedings under Section 138.
- SARFAESI Act
- A 2002 law allowing banks and NBFCs to recover dues on secured loans by taking possession of pledged collateral without court intervention. It applies to secured debt (e.g. home or auto loans), not unsecured credit-card dues.
- Unsecured Loan
- A loan not backed by any collateral, such as a credit card, personal loan, or app-based loan. Because there is no asset to seize, unsecured dues are the most commonly negotiated and settled.
- Principal vs Outstanding
- The principal is the original amount borrowed; the outstanding is the current total owed, including accumulated interest, penalties and fees. Settlement negotiations focus on reducing the inflated outstanding back toward the genuine principal.
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