Skip the theory. This is the exact filing playbook MSME borrowers use to invoke the RBI 8 June 2023 compromise-settlement framework and close a One-Time Settlement in 90–150 days.
The RBI OTS framework is not a benefit you claim — it is a route you file. Every scheduled commercial bank must have a Board-approved compromise-settlement policy (RBI circular DOR.STR.REC.20/21.04.048/2023-24 dated 8 June 2023). Your job as an MSME borrower is to file a proposal that fits inside that policy, not to argue the policy itself.
In practice, banks sanction OTS at waivers of 35–70% of the total outstanding depending on NPA vintage, security cover and realistic recovery value. The number is not negotiated on emotion; it is negotiated against the bank's own internal Recovery Value Statement (RVS). Once you understand what number the bank has already written down, you know what to offer.
This page is a working checklist: what qualifies, what to file, who to file it with, what the bank does internally, and how to close the file without leaving guarantor or CIBIL exposure open.
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Three documents run this process, and only three. First: RBI's 8 June 2023 Framework for Compromise Settlements & Technical Write-offs — it forces every regulated lender to have a written policy and to apply it consistently. Second: your bank's own Board-approved compromise-settlement policy — this is the document you are actually negotiating against, and you can (and should) ask for the relevant extract in writing. Third: your sanction letter and security documents — these define what the bank can enforce if you don't settle. Everything else (SARFAESI, DRT, IBC) is background pressure, not the settlement instrument itself. Keep the file narrow: RBI framework → bank policy → your proposal → sanction letter → agreement → No Dues Certificate.
This page is educational and is not legal or financial advice. Every bank evaluates settlement individually and each case turns on its own facts.
The following RBI and statutory instruments are the primary reference points for this topic. Frameworks are directional; individual banks translate them into Board-approved policies.
Every bank has the same internal machinery: a Recovery Value Statement (RVS) is prepared → the file moves to a committee (branch → regional → zonal → HO / SAM depending on ticket size) → the committee sanctions a waiver band → a settlement letter is issued → you pay per the schedule → a No Dues Certificate is released. Ticket size drives the ladder: below ~₹25 lakh usually clears at regional level in 30–60 days; ₹25 lakh–₹5 Cr goes to zonal (60–90 days); above ₹5 Cr moves to HO / Stressed Assets Management with 90–150 day cycles. A proposal that already speaks in the bank's template language (RVS-anchored, principal-first, upfront deposit + tail EMIs) moves 30–60 days faster than a free-form request letter.
Case review — outstanding, NPA stage, security cover, promoter exposure. 30-minute consultation.
3-year financials, bank statements, GST, sanction letters, hardship narrative and source-of-funds evidence.
Structured proposal referencing RBI framework, RVS working, precedent cases and payment schedule.
Proposal filed with the right authority — SAM branch / SARB / SAG / Regional Collections Head.
Follow-up, counter-offers, precedent deployment and final waiver / structure negotiation.
OTS sanction letter, down-payment, balance tranches, and receipt reconciliation.
No Dues Certificate, security release, CIBIL update, guarantor discharge.
| Point | RBI framework says | What banks actually do |
|---|---|---|
| Who can apply | Any borrower per Board-approved policy | Non-wilful MSME accounts in SMA-2 / NPA / written-off |
| Waiver quantum | Not prescribed — bank discretion | 35–50% for sub-standard, 50–70% for doubtful/loss/written-off |
| Payment terms | Board-approved policy governs | 10–25% upfront, balance in 3–12 months |
| Sanction timeline | Not prescribed | 30–60 days (regional) · 60–90 (zonal) · 90–150 (HO/SAM) |
| Cooling period for fresh credit | Minimum 12 months from settlement | 12–24 months at same bank; other lenders vary |
| Guarantor discharge | Silent — contractual matter | Must be explicitly written into the settlement agreement |
| CIBIL reporting | Report as 'Settled' | Entry stays 3 years post-payment; repairable via disciplined rebuild |
Rough waiver band based on NPA stage. Actual outcome depends on bank, RVS, DPD and negotiation.
Quick 4-question check. Not a formal opinion.
The practical upside of getting this right for an MSME borrower:
Where this route does not help, or helps less than borrowers expect:
The recurring errors that either delay resolution or reduce the eventual waiver:
Surat weaving unit, account in NPA for 14 months. Filed OTS at ₹96 lakh (40% of book) anchored to the bank's own RVS of ₹88 lakh. Zonal committee sanctioned in 71 days. 20% upfront, balance in 6 monthly instalments. Personal guarantor discharged in the same agreement.
Pune auto-component workshop, written off 3 years earlier. Filed OTS at ₹22 lakh (26% of book). SAM sanctioned in 44 days. Full payment in 90 days; No Dues Certificate with explicit guarantor release.
Ludhiana cold-storage facility, possession notice already issued. Structured OTS at ₹2.85 Cr (46%) with 15% upfront and balance in 9 months against a lien on adjacent land. Auction stayed on sanction; HO cycle took 118 days.
"Filed clean OTS with the right authority. Sanctioned in 4 months at 62% waiver."
"Timely SARFAESI reply and structured OTS saved the shop unit. Closed with No Dues in 5 months."
"Post-13(4) proposal filed with SAM branch — auction stayed and settled at 68% waiver."
Three moves change outcomes more than anything else. (1) File in writing — every proposal, every response, every reminder — and always to a named officer, not a generic branch address. (2) Anchor to the bank's RVS: if the bank's own internal recovery estimate is ₹40 lakh on a ₹1 Cr book, a ₹45 lakh OTS is not a discount, it is a premium the committee can defend. (3) Close the guarantor in the same agreement — a settlement that releases the borrower entity but leaves the personal guarantee live is not a settlement, it is a deferred lawsuit. Beyond that: keep the CIBIL rebuild plan ready before you sign, because the first 12 months post-settlement are when a disciplined borrower can recover a 100+ point score improvement.
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