RBI rules

RBI Guidelines on Loan Settlement: What the RBI Rules Say

This page is the rulebook for settlement itself: what RBI's June 2023 compromise-settlement framework says a lender may do, the cooling period after a settled account, and how the Ombudsman scheme works. For what an agent may or may not do on a call or a visit, use the Recovery Agent Harassment page. For papers, credit-report rights and how to complain, use Borrower Rights. For what changes on 1 January 2027, read the RBI recovery agent rules from 2027 guide. Those pages are linked below.

Get expert support WhatsApp Us

You decide every step

Reviewed by Adv. AK Mishra · Last reviewed: 23 October 2026

Settlement (one-time settlement) under the RBI circular of 8 June 2023

A compromise settlement is an agreement where you pay a sum in cash and the lender treats its claim as fully settled. The lender may give up part of the amount you owe (RBI/2023-24/40).
Every bank and NBFC must have a Board-approved policy for settlements, including the permissible sacrifice and how security is valued. The lender decides under that policy; the circular does not give borrowers a right to a settlement.
Approval must come from an authority at least one level above the one that sanctioned the loan, and an official who sanctioned the loan cannot approve its settlement.
If the agreed settlement amount is to be paid over more than three months, RBI treats the arrangement as restructuring.
After a compromise settlement there is a cooling period before the lender can lend to you again: at least 12 months for non-farm loans, or longer under the lender's policy.
Where recovery proceedings are pending before a court or tribunal, the settlement is subject to that forum's consent.

Fair practices, recovery conduct and complaints

Fair Practices Code (RBI, 5 May 2003): lenders were told to adopt a Board-approved code covering clear loan terms in writing, a copy of the loan agreement for the borrower, and grievance redressal. Check rbi.org.in for the current consolidated version that applies to your lender.
Calling hours, visits, threats and how to complain about an agent belong on the Recovery Agent Harassment page, not here. The 2027 changes to recovery-agent rules are written up separately in the 2027 recovery-agent guide. Both are linked below.
Reserve Bank – Integrated Ombudsman Scheme, 2026: complain to your lender first. If it does not reply within 30 days, or you are not satisfied, you can file at cms.rbi.org.in, generally within 90 days. The RBI contact centre is 14448.
How a settlement is reported on your credit report is explained in the loan settlement vs closure guide, linked below.

Limits and risks

The 8 AM to 7 PM calling limit is covered, with the steps to complain, on the Recovery Agent Harassment page.
A settled account is usually reported to credit bureaus as "settled", which can affect future borrowing. Settlement does not improve your CIBIL score.
The lender decides any settlement.

Sources used on this page

Common Questions

Does RBI force banks to accept a loan settlement?

No. RBI's Framework for Compromise Settlements and Technical Write-offs (8 June 2023, RBI/2023-24/40) requires lenders to have Board-approved settlement policies, but each lender decides whether to settle and on what terms.

What is the cooling period after a loan settlement?

Under the June 2023 framework, a lender cannot give fresh loans to a borrower whose account it settled until a cooling period passes. For loans other than farm credit, the floor is 12 months; lenders may set longer periods.

What hours can recovery agents call?

Right now, RBI circular RBI/2022-23/108 (12 August 2022) says lenders and their agents must not call you before 8 AM or after 7 PM to recover overdue loans. From 1 January 2027, the amendment directions also cover visits in the same hours, unless you have asked otherwise.

Where do I complain if my bank ignores me?

Complain to the bank first and keep the reference number. If there is no reply within 30 days, or you are unhappy with the reply, you can complain under the RBI Integrated Ombudsman Scheme, 2026 at cms.rbi.org.in within 90 days — if your lender is covered (housing finance companies and smaller NBFCs are not). Complaints filed before 1 July 2026 stay under the 2021 scheme. See our [RBI Ombudsman complaint guide](/blog/rbi-ombudsman-complaint-guide).

Is this legal advice?

No. This page sums up public RBI documents as general information. For your own case, read the circulars and, if needed, talk to a lawyer.

See all FAQs

Request a Callback

Tell us a few details about your loans. We will look at them and explain the options that may suit you.

Get Expert Support Talk to an Advisor

Borrower rights and how to stop harassment RBI recovery agent rules 2027 (detailed guide)RBI guidelines on recovery agents Legal recovery vs recovery agent harassment Can a recovery agent visit your home or workplace?Loan Settlement Personal Loan Settlement Check your settlement eligibility