One Time Settlement (OTS)

One Time Settlement (OTS) Definition: One Time Settlement (OTS) is a compromise arrangement where a lender agrees to accept a lesser amount than the actual outstanding debt to permanently square off the account, taking a specific 'haircut'.

Why it matters in Debt Collection

• Usually deployed for accounts that have been NPAs for a prolonged period.
• Guarantees immediate liquidity for the bank rather than engaging in years of expensive litigation.
• After an OTS, the borrower's credit report shows 'Settled' rather than 'Closed', preventing them from taking future loans easily.