Loan Settlement Calculator: How to Estimate the Amount Your Bank Will Actually Accept
A settlement number is not a wish — it is the output of a calculation the bank runs internally. It compares what a lump sum today is worth against what a full recovery through SARFAESI or DRT would net after four to seven years of cost, delay and haircut. Model that comparison and you can predict the acceptable band before you make an offer.
- Run the same net-present-value test the bank's credit committee runs
- Use waiver benchmarks by ageing bucket and security cover, not guesswork
- Get a working estimate in two minutes with our OTS calculator
What this Calculator guide covers
This page is for general information. It is not legal, tax or investment advice. Every NPA / SARFAESI / DRT matter is fact-specific — speak to a qualified advisor before acting.
Settlement Benchmarks by Exposure Type
Indicative acceptance bands from our case files. Read them as a starting range for negotiation, not a guarantee — sanction authority and vintage change the outcome.
| Exposure type | Typical settlement | Reference base |
|---|---|---|
| Unsecured personal loan | 40–65% | Of total outstanding |
| Credit card | 40–70% | Of total outstanding |
| Business loan (unsecured) | 35–60% | Of total outstanding |
| Loan against property | 65–85% | Of realisable security value |
| Home loan | 70–90% | Of realisable security value |
| Cash credit / OD (secured) | 55–80% | Of realisable security value |
| Post write-off / ARC-held | 25–50% | Of total outstanding |
The bank's net present value test, in plain arithmetic
Take the realisable value of the security — not the circle rate, and not what you paid. Reduce it by the expected auction discount, typically 15–30% because a distressed sale rarely matches an open-market price. Reduce it again by recovery costs: valuation, publication, legal counsel, DM possession, and the bank's own staff cost, commonly 5–10%. Then discount the remainder over the realistic recovery horizon of three to five years at the bank's cost of funds.
A ₹1 crore property securing an ₹85 lakh outstanding often produces a discounted realisable value in the ₹52–62 lakh range once those haircuts are applied. That range — not the ₹85 lakh book number — is the bank's true alternative, and it is the number your offer must beat. This is precisely why a well-argued OTS at ₹65 lakh gets approved while a ₹40 lakh offer on the same file is rejected outright.
Which components of the outstanding are actually negotiable
The outstanding you are shown is rarely one number. It is principal, contracted interest to the NPA date, unapplied or 'memorandum' interest accrued after classification, penal interest, legal and incidental charges, and often insurance premiums debited to the account.
Memorandum interest and penal charges are the softest components — they were never booked as income in many cases, so waiving them costs the bank little. Principal is the hardest. A useful mental model: aim to pay principal minus a hardship discount, and treat everything above principal as the negotiating layer.
Least negotiable. Expect to pay 60–90% of it on secured exposure.
Partially negotiable — often halved.
Highly negotiable — routinely waived in full.
Almost always waived in an approved OTS.
Usually payable — banks rarely absorb third-party costs.
Use the calculator, then pressure-test the output
Our OTS calculator takes your outstanding, security value, ageing and hardship profile and returns an indicative acceptance band plus the payment structure most likely to be approved. It is a modelling aid, not a sanction — the final number is set by the bank's competent authority under its board-approved compromise settlement policy, which since RBI's June 2023 framework must exist at every regulated lender.
Pressure-test the output against three things before you make the offer: your genuine lump-sum capacity today, whether a part-payment-plus-instalments structure is acceptable to your lender, and whether the account is close to a stage change (possession, auction publication, DRT filing) that will shift leverage in the next 60 days.
Structure matters as much as the number
Two offers of the same value are not equal. A bank will usually prefer ₹60 lakh with 25% upfront and the balance in 90 days over ₹64 lakh spread across 18 months, because the discount rate and the default risk on instalments are real to them.
Standard approvable structures: 10–25% on approval, balance within 90 days for the cleanest sanction; or 25% upfront with the balance in three to six monthly instalments carrying a stated interest, which most banks now permit under their compromise settlement policy. Anything beyond 12 months usually requires a higher sanctioning authority and is where files stall.
Calculator — answered questions
Have an ex-banker validate your settlement number
We recompute the bank's own realisable-value test on your file and tell you the number and structure most likely to be sanctioned.