Bank Rejected Your OTS? You Can't Force a Rethink

A Calcutta High Court ruling confirms that banks cannot be legally forced to reconsider a rejected one-time settlement offer. If your OTS is turned down, no court can compel the bank to reopen talks. Here's what borrowers must know before making an OTS offer.

Here's what happened: The Calcutta High Court dismissed a borrower's petition that sought to compel a bank to reconsider a rejected one-time settlement (OTS) proposal.. The court held that banks exercise commercial discretion on OTS decisions and cannot be directed by a court writ (mandamus) to reopen or re-evaluate a rejected offer.. This ruling reinforces that OTS acceptance is entirely voluntary for banks — no RBI regulation or court can force a bank to negotiate or accept a settlement proposal..

What you should do: Prepare your strongest OTS offer upfront — include a realistic lump-sum figure backed by documented financial hardship before submitting, since rejection gives you no legal recourse.. If your OTS is rejected, escalate within the bank first — write formally to the zonal or recovery head with revised terms before assuming the deal is dead.. Check your CIBIL report after any OTS discussion: even a rejected OTS negotiation can sometimes trigger a status update, and a settled account stays on your report for up to 7 years..

Banks are more likely to accept an OTS during quarter-end (March, June, September, December) when they need to show reduced NPA numbers — time your offer accordingly.

If you're considering settling a loan, our loan settlement guide walks through the process.